Foreign investors returned to Chinese capital markets in May despite lockdowns

June 8 (Reuters) – Some foreign investors returned to Chinese stock and bond markets in May as Beijing stepped up efforts to stimulate the economy after months of COVID lockdown and heightened global political tensions.

Even as tight virus restrictions persisted, foreign investors bought $2.5 billion net worth of battered China-listed stocks last month, the biggest tally in four months, according to data from Refinitiv Eikon and the stock exchange. from Hong Kong.

In the bond market, China saw a net inflow of $2 billion in May, according to data from the Institute of International Finance (IIF). If confirmed by official data from China, it would end a three-month streak of foreign capital outflows.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said China was among his favorite markets in Asia due to the recent easing of COVID-19 restrictions, government stimulus measures and falling stock market valuations. .

Shanghai ended a two-month virus lockdown on June 1, and the Chinese capital Beijing also eased COVID-19 restrictions, as policymakers refocus on growth to pull the economy out of a tailspin. plummeting, although analysts say it could take months for the economy to get back to firmer footing.

Expectations of the policy shift helped drive an 8% rebound in China’s blue chip CSI 300 index (.CSI300) over the past month.

Fears of possible Western sanctions against China, triggered by Russian military operations in Ukraine, have also faded. Those concerns, caused by Beijing’s friendship with Moscow, contributed to “unprecedented” capital outflows from China in the first quarter, according to the IIF.

Reuters Charts

According to data from Refinitiv, Chinese corporate profits are expected to rise 12.42% in 2022 despite the fallout from its shutdowns, which is higher than the 10.9% average growth in Asia.

The 12-month forward price-to-earnings ratio for Chinese companies is 9.62, the second-lowest in Asia after South Korea, prompting some investors to think about bargain hunting.

Chinese stocks faced cumulative outflows of $465 million in the first five months of this year, well below India’s $20.1 billion, Taiwan’s $24.8 billion and $11.3 billion from South Korea.

Goldman Sachs said geopolitical tensions and COVID restrictions don’t fundamentally change the equation of whether or not to invest in the world’s second-largest stock market.

However, the Wall Street bank said that over the past year there have been increasing pressures on global investors to diversify away from China or better manage China-related risks.

Reporting by Patturaja Murugaboopathy, Gaurav Dogra Additional reporting by Samuel Shen and Jason Xue in Shanghai; Editing by Vidya Ranganathan and Kim Coghill

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