China’s stock market to attract US$43.5 billion in fresh foreign capital this year, UBS says

The mainland Chinese equities market is expected to attract 300 billion yuan (US$43.5 billion) in fresh foreign capital this year, as the US-China trade war ebbs and company earnings improve, Swiss investment bank financial services company UBS said on Monday.

The inflows, which will follow a gain of 22.3 per cent in China’s A-shares market in 2019, could drive the market up by another 6 per cent this year, UBS said. It added that this amount only included active fund money. If global index compilers such as MSCI were to continue increasing the weighting of China’s A shares in their emerging markets benchmarks, mainland exchanges could receive more money as passive funds, known as exchange-traded funds, adjust their portfolios to increase their A-share holdings.

UBS strategist Wendy Liu said the per share earnings of China’s 300 largest listed companies could jump 10 per cent this year, buoyed by Beijing’s efforts to slash borrowing costs to help them enhance profitability.

“The further opening up of the securities industry, such as letting foreign investors set up their wholly-owned mutual fund houses and brokerages, will also facilitate a foreign fund influx,” Liu said. “Overall, we are optimistic about the market outlook.”

Based on the close of the CSI 300 Index of 4,164.37 on January 9, a 6 per cent rise would help it break through the 4,400-point level, the Swiss bank said.

A majority-owned securities joint venture in China of Japanese financial services company Nomura also forecast the CSI 300 index could hit the 4,400-point mark in 2020, 4.7 per cent higher than Monday’s close of 4,203.99.