Foreign capital keeps flowing into A-shares

Source: Global Times Published: 2020/7/28 17:10:00

An investor watches stock performance in Shenzhen bourse. File photo: VCG

The trend of foreign capital flowing into Chinese mainland shares continues, an executive of New York-based index provider MSCI said Tuesday, downplaying concerns over net outflows from the A-share market amid recent wild fluctuations. 

Individal investors and hedge funds tend to take profits in the short run, and even long-term investors might need to adjust their portfolios, Wei Zhen, MSCI's head of APAC Index Solutions Research, told a web media briefing.

But recent net capital outflows via northbound trading links between the Hong Kong market and the mainland bourses account for only a tiny portion of the total positions held by northbound investors, Wei said.

The mainland equity market saw a net daily capital flow of 201 million yuan ($28.68 million) on Tuesday. 

Foreign capital flowing into A shares remains a big trend, he commented, citing the nation's effective coronavirus containment, its economic rebound that is much stronger than other economies, and a continued push for capital market deregulation. 

Chinese assets rose to become the largest weighted constituents in the portfolio of the American Funds EuroPacific Growth Fund, the active flagship global equity fund managed by Capital Group, the China Securities Journal reported Tuesday. 

As of June 30, the $153.3 billion fund's investment in Chinese assets hit $23.76 billion. By the end of the second quarter, Alibaba, Kweichou Moutai, Tencent, Meituan Dianping and WuXi Biologics were among the fund's top five Chinese holdings, the report said.

The A-share market performed better than other major economies in the first half of the year, Wei said, and that is set to boost the weighting of A shares in MSCI's indexes. 

Emerging markets currently account for roughly 38 percent of the global GDP, but only 11 percent of the MSCI All Country World Index, the index provider's flagship market capitalization-weighted global equity index. In emerging market allocations, China's index weight fails to match its economic exposure weight. 

In a three-step approach, MSCI boosted the inclusion factor of A shares in its indexes from 5 percent to 20 percent in 2019. 

MSCI's plan for future A-share inclusion will depend on Chinese regulatory authorities' efforts to improve market accesiblity and align the domestic market with its global counterparts, as well as efforts in other areas of investor concern, Wei said.

The index provider this year has plans to roll out a significant number of new indexes, as many as 20, Doug Walls, APAC head of Index Products at MSCI, said Tuesday. 

Global Times 

Posted in: MARKETS

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