The worsening Sino-U.S. trade war has battered China's stocks and
currency this year but that hasn't stopped foreign investors rushing
into the country's capital markets, which are increasingly opening up
despite rising protectionism.To get more
china business news, you can visit shine news official website.
If
anything, the selloff has hastened bargain-hunting among investors,
such as Fidelity International, UBS Asset Management and J.P. Morgan
Asset Management, which believe the long-term growth potential of the
world's second biggest economy outweighs the more immediate hit from
trade disputes.
"In this environment, a handful of 'fallen
angels' can be found," said Catherine Yeung, investment director at
Fidelity International. She notes that compared with developed markets,
China's A-shares have already priced in much of the uncertainty around
trade.
UBS AM, J.P. Morgan AM and Neuberger Berman have also stepped up A-share buying this year.
"China
has accelerated the opening up of its capital markets this year to
mitigate the negative impact (of the trade war)," said Hu Yifan, China
economist at UBS Wealth Management.
Following global index
provider MSCI's historic inclusion of China A-shares in June, regulators
are redoubling efforts to integrate the $7 trillion stock market and
$11 trillion bond market into the global financial system.
China's
global market profile could grow over the next 12 months with the
imminent launch of the Shanghai-London Stock Connect, the possible
expansion of A-shares weighting in MSCI indices and the potential entry
into FTSE Russell's global equity indexes.
DREAM SCENARIO
In
a "dream scenario," BNP Paribas estimates China's efforts to connect
its relatively isolated capital markets to the global financial system
could create $1.3 trillion - $1.45 trillion of foreign demand for yuan
assets.
During the first eight months of the year, China's stock
market drew $47.7 billion of net foreign portfolio inflows, according to
the Institute of International Finance (IIF).
"We've been
positive about China's consumption growth opportunities for a while,"
said Shumin Huang, head of research for Greater China Equities at J.P.
Morgan Asset Management.
Huang, whose team covers over 150
A-shares, sees long-term investment opportunities in battered sectors
such as healthcare and education.
Several China-focused
exchange-traded funds popular with long-term foreign investors have seen
increased inflows. These include iShares FTSE A50 China Index ETF and
Xtrackers Harvest CSI300 ETF.
Overseas holdings of China stocks
have jumped nearly 50 percent over the past year, but still account for
less than 3 percent of total market capitalisation.
In the bond
market, overseas holdings surged 70 percent over the past 12 months to
1.75 trillion yuan ($255.25 billion), although this too is meager,
accounting for just 2 percent of the market.
However, Wang
Xiaojian, Chairman of Shanghai Yaozhi Asset Management Co, expects
foreign bond ownership to double over the next five years. His group
plans to launch a bond fund in Hong Kong to help foreign institutions
invest in mainland Chinese debt.
China's net capital inflows this
year contrast with outflows seen in neighboring markets such as
Thailand, Russia and South Korea, according to IIF data, drawn out by a
rising U.S. dollar and stocks.
Despite increased trade tensions, China's market operators are keen to show they're open for business.
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