China stock market

Global investors buy Chinese equities at record pace, have spent US$514 million on average every day in November

  • Foreign buying in November set to surpass that of May, when foreign investors bought Chinese equites worth 2.7 billion yuan on average
PUBLISHED : Thursday, 15 November, 2018, 8:02pm
UPDATED : Thursday, 15 November, 2018, 8:02pm

Foreign investors are buying Chinese stocks at a record pace this month, on the back of unprecedented support measures unveiled by Beijing and increasing odds that China will strike a deal with the United States to resolve their trade war.

On average, global fund managers have spent 3.57 billion yuan (US$514.6 million) every day so far in November, buying A shares traded in mainland China through the exchange links in Hong Kong, more than any month since the programme was launched in 2014, according to Bloomberg.

On November 2, they ploughed a record 17.9 billion yuan into Chinese shares, according to Bloomberg data.

Overseas interest in Chinese equities has quickly picked up this month after top leaders from President Xi Jinping to Premier Li Keqiang pledged to ease funding for the country’s private sector, so as to stem declines in economic growth and the stock market.

Just last month, foreign traders were net sellers, dumping an average of 473.2 million yuan in Chinese stocks daily, as a liquidity squeeze deepened among smaller companies that were finding it harder to access bank loans than state-owned enterprises. Now, foreign buying in November is set to surpass that of May, when foreign investors bought Chinese equites worth 2.7 billion yuan on average, just before MSCI added Chinese stocks to its global indices for the first time.

The Shanghai Composite Index has rebounded 7.3 per cent after touching a four-year low in October, paring its losses this year to 19 per cent. The benchmark, however, remains the worst performer among the world’s major markets in 2018.

Optimism over cooling trade tensions between the world’s two-biggest economies has also provided a respite to Chinese stocks. Xi is set to meet his US counterpart, Donald Trump, on the sidelines of the G20 summit in Argentina later this month to iron out the trade war. Beijing is said to have made a slew of concessions to Washington, including lifting the limit on foreign investment in certain industries.

“Northbound and ETF flows suggest at least some market participants have higher hopes for a China market that has lingered in bear territory since June,” said Thomas Taw, head of iShares investment strategy for Asia-Pacific at BlackRock.