Global Times｜Global investors accelerate Chinese asset purchases with major ETF inflows surging in July
Global investors are demonstrating remarkable confidence in Chinese assets, with five major overseas China equity exchange-traded funds (ETFs) collectively attracting $2.7 billion in net inflows in July, according to market data tracker FUTU.
From end-June to July 25, the iShares MSCI China ETF's assets under management expanded 12.38 percent to $7.187 billion, while the KraneShares CSI China Internet ETF saw a 20 percent jump to $7.648 billion. The scale of Direxion Daily FTSE China Bull 3X Shares grew 14.13 percent to $1.253 billion. Assets under management at Xtrackers Harvest CSI 300 China A-Shares ETF and iShares China Large-Cap ETF grew 10.54 percent and 5.32 percent, according to FUTU.
This surge came amid heightened interest from South Korean retail investors, which executed $5.764 billion in Chinese stock trades through July 25 year-to-date, making China their second-largest overseas investment destination, according to SEIbro, a market data provider under the Korea Securities Depository.
South Korean investors have shown particular enthusiasm for Chinese tech giants, with Xiaomi, BYD, and Alibaba topping their Hong Kong buy lists. In the A-share market on the Chinese mainland, BYD, Hengli Hydraulics, and Huatai Securities were the most popular picks.
This also mirrors a growth trend among institutional investors, as evidenced by the Hang Seng Index's 27 percent year-to-date rally through July 29.
Foreign institutions have been particularly active in Hong Kong's market, with the cumulative shareholding ratio of stable foreign capital and flexible foreign capital reached 60.4 percent as of the second quarter, the Securities Daily reported.
Several foreign capital behemoths have highlighted growing opportunity in the Chinese market and voiced their optimism regarding the revaluation of Chinese assets. On Wednesday, Standard Chartered opened a new Priority Private Centre in Hangzhou, East China's Zhejiang Province, as it plans to expand its wealth management services to Chinese customers.
"China is one of the most dynamic and outstanding markets for Standard Chartered. The strong and growing demand for wealth management among Chinese residents demonstrates the confidence and momentum of the market. We see vast opportunities here and will continue to increase our investment," Judy Hsu, CEO, wealth and retail banking and greater China and North Asia, said in a statement sent to the Global Times on Wednesday.
In a recent research note, Goldman Sachs pointed out that Chinese equities have recently broken out of their trading ranges, with the MSCI China reaching a near four-year peak and the CSI300 a year-to-date high. The drivers of these gains include robust second-quarter GDP growth, the revival of Hong Kong's IPO market, record-breaking Southbound inflows, and a wide gap between rising foreign investor interest in Chinese stocks and their still-conservative equity allocations, the investment bank said.
"We retain our Overweight stance on China in a regional context, with our refreshed 12-month index target pointing to 11 percent potential returns for MSCI China," read the Goldman Sachs note.
Phillip Cheng, Head of equity research at AllianzGI FMC, Allianz China Select Hybrid Fund Manager, said in a note sent to the Global Times on Wednesday that Chinese equities have entered a new phase of revaluation. This shift is being driven by multiple structural factors, including the strengthening of Chinese companies' long-term competitiveness and sustainable profitability amid the nation's ongoing economic transformation.
Additional catalysts include the gradual reduction of the mix of real estate risks, robust policy support from authorities, and the subsequent recovery of investor confidence across markets, Chen added.
Global investors are growing increasingly optimistic about A-shares' outlook, as China's pro-growth policies gain traction and economic indicators show steady improvement, Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times on Wednesday, adding that the positive market response suggests that Chinese equities may be entering a new phase of appreciation.