CSRC vice-chairman expects more foreign fund flows into A shares although bleak economic outlook could upset picture
- Fang Xinghai said foreign capital will continue to pour into mainland-listed equities as long as handsome investment returns can be generated
- The senior regulator’s remarks are in line with recent efforts by Beijing to bolster capital flows into the country’s US$11.5 trillion stock market
Fang told reporters on the sidelines of the Lujiazui Forum in Shanghai on Friday that net inflows to the Shanghai and Shenzhen stock exchanges had reached 120 billion yuan (US$16.8 billion) so far this year, compared to 85 billion yuan for the whole of 2022.
He added that foreign capital will continue to pour into mainland-listed equities as long as China’s economy and companies can continue to generate handsome investment returns, despite souring US-China relations.
“The CSRC has constantly and actively been communicating with global investors, shedding light on what has been happening in China,” Fang said. “I believe the link [between China’s stock market and global investors] can be strengthened if we can get our [communication] jobs well done.”
The senior regulator’s remarks are in line with recent efforts by Beijing to bolster capital flows into the country’s US$11.5 trillion stock market, as policymakers grapple with stumbling growth in the world’s second-largest economy.
Top Chinese officials have recently made efforts to head off further economic decoupling with the West, extending an olive branch to global corporate executives including Citigroup’s chief executive Jane Fraser, Tesla CEO Elon Musk and Apple CEO Tim Cook. These leading executives have also been keen to re-engage with China, a huge market for them, following the country’s emergence from Covid-19 lockdown measures.
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China’s yuan-denominated A shares are still off-limits to overseas investors, who can only access them via stock connection schemes between exchanges in Hong Kong and on the mainland, or through the qualified foreign institutional investor (QFII) programme.
Although China’s GDP grew by 4.5 per cent in the first quarter, the latest trade data painted a sombre picture. Exports shrank by 7.5 per cent in May from the same month last year, when Shanghai was in the middle of a citywide lockdown.
Producer prices in May plunged 4.6 per cent year-on-year, the biggest drop in seven years, the National Bureau of Statistics announced on Friday.
“Fang’s statement shows that Chinese officials are taking a positive stance on foreign capital, but the bleak economic outlook may deter foreign asset managers from increasing their A-share holdings,” said Wang Feng, the chairman of Shanghai-based financial services group Ye Lang Capital. “A big jump in capital inflows is unlikely to be seen in the near future.”
Overseas traders sold a combined 12.1 billion yuan of yuan-denominated stocks via the exchange link with Hong Kong in May, the second consecutive month of net selling.
Morgan Stanley and Nomura have both lowered their year-end forecasts for the major benchmarks tracking Chinese stocks. The CSI 300 Index rose 0.4 per cent at the close on Friday, narrowing its annual decline to 0.9 per cent this year, on expectations that weaker data will spur more supportive measures from policymakers.
Some economists expect more measures to support home-buying and cuts in the reserve requirement ratio for banks in the coming months.
On the first day of the forum, CSRC chairman Yi Huiman also called on investors to focus on long-term value and ride out volatility in local stocks, while pledging to improve the quality of listed companies.
