Overseas investors snap up A-shares in 2023, buoyed by vigorous economic recovery
Influx of $1.85 billion spotted in first three trading days of 2023
Published: Jan 05, 2023 08:23 PM

A-share Photo: VCG

A-share Photo: VCG

Foreign investors are snapping up Chinese A-shares as 2023 starts, pinning hopes on the reopening of China's giant economy to reignite global growth. Analysts expect overseas capital inflows to exceed 2022, supported by China's multi-pronged measures to power its economic recovery.

Foreign capital flows into Chinese equities have gotten off to a strong start in 2023. As of Thursday's market close, net capital inflows through the northbound trading system into A-shares listed on major bourses on the Chinese mainland exceeded 12.7 billion yuan ($1.85 billion). 

Since trading resumed on Tuesday, several companies, including Centre Testing International Co and Chacha Food Co, have seen their foreign ownership reach the ceiling of 28 percent, which prompted stock exchanges to issue notice suspending further purchases by overseas investors.

Foreign capital inflows into A shares in 2023 will be better than last year, Ethan Wang, head of investment strategy at Standard Chartered China, told the Global Times in an interview on Thursday.

A possible shift in the US Federal Reserve policies and a weakening US dollar will make Asian assets, especially those of China, more attractive to overseas investors, given the growth prospects of the world's second largest economy and A-shares' low valuations, according to Wang.

In the context of China's strong economic recovery prospects, foreign investors have become bullish on the Chinese market.

In its Outlook 2023 report, Standard Chartered Wealth Management Chief Investment Office predicted that growth in China will rebound due to the government's optimization of coronavirus responses and its pivot to growth stabilization.

In 2023, international headwinds may continue to be strong, and recessions in Europe and the US may be difficult to avert. In contrast, China will continue its proactive fiscal policy and prudent monetary policy, which will help boost China's economic recovery, and, it is expected to become an important growth engine for the global economy, said David Leung, head of wealth management at Standard Chartered China, said a statement.

Neuberger Berman estimates China's GDP to grow by 5 percent in 2023, with a moderate recovery in consumption, stabilized property sector, growth in investment and low inflationary pressure, the China Securities Journal reported.

The Central Economic Work Conference convened in December set government priorities for 2023 to expand domestic consumption, support the private sector and promote the steady development of the property market.

Proactive fiscal policy and prudent monetary policy will continue to be implemented. The proactive fiscal policy should be stepped up, with a better mix of tools including higher budget deficit, special-purpose bonds and interest subsidies. 

The prudent monetary policy should be targeted and effective, with reasonable and sufficient liquidity to be maintained, according to the meeting.

Telecom services and consumer discretionary sectors in China are expected to benefit from increasingly supportive policies and reduced mobility restrictions, according to Standard Chartered.

In contrast, the team expects the US dollar to turn lower over the next 6 to 12 months as the Fed is estimated to pause in raising interest rates.

It's wise for overseas institutions to scale up investment in the Chinese market, as major changes in coronavirus responses and the prospect of pro-growth monetary policies to ensure ample liquidity have rebuilt market confidence in Chinese equities, Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology, told the Global Times on Thursday.

"The biggest overhang in 2023 for Europe and the US is another financial crisis, which may lead to a stock market crash. In this case, China will be a bright spot in the world in 2023, providing a safe haven for international capital," Dong said.