China equity funds welcome rising capital inflows, laying solid foundation for achieving annual target
Published: Jul 10, 2024 11:17 PM
A batch of new energy vehicles is about to be exported at the Port of Suzhou on December 13, 2023. Photo: VCG

A batch of new energy vehicles is about to be exported at the Port of Suzhou on December 13, 2023. Photo: VCG

China equity funds have welcomed rising capital inflows for a string of five consecutive weeks, reflecting a vote of confidence in the stable recovery of the world's second-largest economy amid multiple sound macro-economic figures and expectations for measures on further comprehensively deepening reform and advancing Chinese modernization.

While key economic data are due to be published, analysts forecast the country's GDP growth rate will be 5.2 percent in the first half of the year, laying a solid foundation for the achievement of pre-set annual GDP growth target. They called for targeted fiscal and monetary policies to tackle remaining challenges across the economy.

Chinese Premier Li Qiang on Tuesday held a symposium on the economic outlook. Li called for the solid implementation of macro policies and enhancement of the effectiveness of the policies to promote the healthy development of the economy, the Xinhua News Agency reported.

According to data released by global industry information provider Emerging Portfolio Fund Research, Chinese equity funds have seen capital inflows for the fifth straight week by July 3, while the country's bond funds reported flows for eight consecutive weeks, Shanghai Securities News reported on Wednesday.

Recently, it is becoming a point of consensus among foreign financial institutions that investors' confidence in China's financial markets are storming back amid the country's improved macro-policies.

Although Chinese stocks have now dropped somewhat after a strong bounce back of 32 percent in the first five months of the year, we still maintain the view that Chinese stocks will bounce again over the upcoming months, Hu Yifan, regional chief investment officer and head of macroeconomics for Asia-Pacific at UBS Global Wealth Management, wrote in a note sent to the Global Times.

Now is a good opportunity for investors to seize China's stock market opportunities amid the country's improving market fundamentals and deepening reforms, Hu added.

Compared with developed markets, the valuations of Chinese stocks remain low, indicating further growth potential for Chinese stocks, Singapore's DBS said in investment insights for the third quarter. The bank says robust profit prospect will support the optimistic development momentum.

Notable growth of high-frequency data in various sectors indicated the potential of China's domestic demand, the resilience of foreign trade and enterprises' innovation vitality, underscoring the recovery momentum of the world's second-largest economy.

The consumer price index (CPI), a main gauge of inflation, was up 0.2 percent year-on-year in June, rising for the fifth straight month as improving consumer sentiment continued to drive domestic demand, data from the National Bureau of Statistics showed on Wednesday.

China set to publish its GDP and several other macro-economic data on July 15.

The economy experienced an overall recovery in the first half of 2024, with the economic growth rate expected to reach around 5.2 percent, laying a solid foundation for the achievement of annual GDP growth target, Wen Bin, chief economist from China Minsheng Bank, told the Global Times.

Wen said exports play a remarkable role in driving the economy. "In the second quarter, export growth rate continues to rebound, which contributes to investment and production in the manufacturing sector. However, domestic consumption remains weak at the moment, whereas infrastructure investment should strengthen," he said.

Analysts said that the upcoming third plenary session of the 20th Communist Party of China Central Committee to be held between July 15-18 in will serve as a barometer to see how policymakers press ahead with comprehensively deepening reform and further shoring up the vitality of the real economy.

On the Tuesday seminar, Premier Li emphasized the need to pursue innovation-driven development to consolidate the economic recovery momentum while giving full play to the role of enterprises and strengthening targeted policy support for enterprises to achieve breakthroughs in more core technologies in key fields.

Since the beginning of 2024, the development of new quality productive forces has been picking up speed. In the future, China should continue to boost related reforms and innovations through developing new quality productive forces in order to enhance enterprises' innovation vitality and achieve high-quality development, Chen Fengying, an economist and former director of the Institute of World Economic Studies at the China Institutes of Contemporary International Relations, told the Global Times on Wednesday.

By cultivating new technologies and new industries while upgrading traditional industries, China will continue to inject fresh vigor into global development, Chen said, forecasting that China will continue to be a major engine of the global economy this year by contributing about 30 percent to global growth.