GT Voice: Why now is a good time to bet on Chinese stocks

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Global investors are returning to mainland stock markets after the selloff earlier this year, with fund managers generally believing negative factors “have started to reverse”, the Financial reported on Friday. Times.

According to the report, foreign investors using the Shanghai-Hong Kong and Shenzhen-Hong Kong stock links bought 28 billion yuan ($4.2 billion) worth of Chinese mainland stocks over the past year. last week.

As of Thursday’s close, northbound trading via Exchange Connections saw a net inflow of capital into the A-share market for five consecutive trading sessions. The continued net inflow of capital came at a time when the benchmark Shanghai Composite index jumped more than 11% from its low point in late April. This could serve as strong evidence that foreign investors are still bullish on Chinese financial markets and have been following the market for buying opportunities.

It is true that the worst outbreak in China in two years, the situation between Russia and Ukraine and other factors have hurt market sentiment in recent months. Nevertheless, with the continuous improvement of the epidemic prevention and control situation, the accelerated resumption of production in some parts of the country and the central government’s emphasis on stabilizing economic growth, investors have gradually regained optimism and rationality about China’s economic recovery and development.

The board of ChiNext, the Chinese board of Nasdaq-style growth companies, just posted a monthly gain of 3.71% in May. Of course, one month’s gain is not enough to recover the losses of the previous months. The ChiNext advice is down around 26% since the start of this year.

Nevertheless, it should be noted that the relatively low price basis of Chinese stocks provided an excellent opportunity for investors to intervene. Any investor who believes in valuation may regret missing out on such an opportunity, especially at a time when major global markets are at risk. significant volatility due to geopolitical factors and the change in Fed policy.

In the United States, there are growing fears that the Fed’s aggressive plan to rein in inflation could lead to a recession, and any negative news could easily spook investors and trigger a sell-off.

The Nasdaq Composite Index has seen great volatility this year, but it is widely believed that the worst may not be yet to come for US stock markets as major stock indexes are still high. The Nasdaq index is still more than four times what it was a decade ago, meaning corrections will be inevitable.

In contrast, Chinese equity markets have more certainty in terms of growth potential. It is undeniable that the recent outbreaks have caused some shocks to economic activities, but this has not harmed the fundamentals of the Chinese economy. At present, two Chinese megacities – Beijing and Shanghai – have just emerged from Omicron’s shadow, bringing social and economic activities back to normality.

In addition, an unprecedented meeting on the stabilization of the economy was held, sending an unequivocal signal on the deployment of more growth-friendly policies. Moreover, China’s desire to accelerate financial openness has not changed. All of these have laid the groundwork for the growing appeal of Chinese financial assets to foreign capital.

It would be unfortunate if foreign investors missed out on this wave of Chinese investment opportunities.

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