Foreign investors upbeat on China's capital market amid soaring net purchases, expanding operation

This photo taken on Nov. 4, 2022 shows an evening view at the Bund in east China's Shanghai. (Xinhua/Jin Liwang)

As the economy continues to recover, China's capital market is further demonstrating its strong attractiveness, reported China Securities Journal on Monday. 

In the first quarter of 2023, northbound capital, or the amount that overseas investors pump into A-shares via the Stock Connect program linking Shanghai, Shenzhen, Hong Kong bourses, has accumulated net purchases of over 180 billion yuan, more than double the amount for the whole year 2022.

The steady opening up of China's capital market in recent years has brought noticeable opportunities for international financial institutions and global investors. In addition, China's financial management authorities have currently been reiterating that international financial institutions and global investors are welcome to continue to expand their business and investment in China and share the dividends of China's high-quality economic development.

Many foreign institutions believe the overall improvement in China's economic performance has injected more certainty into the development of the world economy, which will further enhance the attractiveness and influence of China's capital market.

--Status of safe-haven highlighted

According to the Asian Economic Outlook and Integration Progress Annual Report 2023 released during this year's Boao Forum for Asia (BFA) Annual Conference, despite the weakening global demand, the developing Asia will act as the backbone, and the rebound of China's economy has sent positive signals to Asia and the world.

China's contribution to world economic growth may exceed one-third this year, said Georgieva, Managing Director of the International Monetary Fund (IMF), on March 26.

In the latest edition of the World Economic Outlook Report, the IMF raised its forecast for China's economic growth this year from 4.4 percent to 5.2 percent.

In the complex and ever-changing world economic development, a series of risks have recently occurred in international financial markets, while China's economic recovery has injected rare certainty into the uncertain situation. For international financial institutions and global investors, the unique appeal of the Chinese market and Chinese assets will thus be highlighted.

According to Ben Simpfendorfer, Managing Partner of Oliver Wyman, China's economy will continue to show strong growth momentum in the future.

Regarding the A-share market, Desmond Kuang, chief investment officer for HSBC Global Private Banking and Wealth in China, believes that the recovery of China's economy will highlight the safe-haven status of China's stock market in the global market, while the current valuation of China's stock market has not yet fully reflected the relevant macro favorable factors.

--High-level systemic opening up promoted with constant efforts

Foreign capital has the unique advantage of connecting domestic and international markets, which is important to accelerate the construction of a new development pattern. Making greater efforts to attract and utilize foreign capital is one of the major arrangements of the Central Economic Work Conference last year for economic work in 2023.

Recently, the heads of China's relevant government departments have met intensively with representatives of international organizations and foreign-funded enterprises, clearly releasing the signal of expanding a high level opening up to the outside world.

Zheng Shanjie, head of the National Development and Reform Commission (NDRC), introduced that efforts will be made to implement a high level of opening up to the outside world, reasonably reduce the negative list of foreign investment access, and ensure a high standard of national treatment for foreign enterprises.

Minister of Commerce Wang Wentao said that the Ministry of Commerce (MOC) will hold a series of activities to boost consumption and investment in 2023, focusing on promoting consumption upgrade and potential release, building more and better platforms for investment docking, so that the vibrant Chinese market can provide big opportunities for enterprises from all over the world.

Minister of Finance Liu Kun said China will insist on promoting investment facilitation and trade liberalization in the process of globalization, improving tariff policies on imports, putting more effort to stabilize foreign investment and foreign trade, and encouraging the new development of foreign trade.

--Go long on China becomes consensus

In the view of many foreign institutions, China's economy has strong resilience, potential and vitality. The Chinese market shows an open, mutually beneficial and win-win attitude. Investing in China is not an option but a must.

In particular, China's capital market continues to deepen reforms and more pragmatic measures to expand openness are in the pipeline, attracting more foreign institutions to buy Chinese assets and expand the Chinese market. According to Wind data, in the first quarter of this year, northbound capital accumulated a net purchase of 185.988 billion yuan, far more than the 90.02 billion yuan for the whole of last year.

At the same time, foreign institutions are accelerating their business expansion in the Chinese market. Oliver Bäte, Chairman of the Board of Management of Allianz Group, revealed during the China Development Forum 2023 that Allianz is strengthening its business layout in China's wealth management market and expects to obtain the qualification of public fund and pension investment management.

Since this year, two wholly foreign-owned public fund management companies, Schroder and Alliance Bernstein, have been given approval to do business in China. In addition, Shanghai J.P. Morgan and Morgan Stanley Huaxin Funds have also been approved to change their shareholders and actual controllers, transforming from joint venture fund companies to solely foreign-funded fund companies. Up to now, there are 8 wholly foreign-owned fund companies in China.

The industry expects that the door of opening up will become wider and wider this year, with more pragmatic opening-up initiatives to be launched, attracting more and more foreign investment to come in.