China stock market: foreign investors halt exodus in sign of improving confidence after state intervention

Foreign investors bought a net 60.7 billion yuan (US$8.4 billion) of onshore shares in February through the Stock Connect programme, ending six months of selling

The return of foreign inflows reflects an improvement in confidence among investors and will add to the momentum, Wanlian Securities analyst says

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An electronic ticker displays stock figures in Pudong’s Lujiazui Financial District in Shanghai. Chinese stocks have bounced back following a slew of market-boosting measures. Photo: Bloomberg

Published: 3:47pm, 1 Mar 2024Updated: 5:26pm, 1 Mar 2024

Global traders resumed buying Chinese stocks in February after an unprecedented six months of outflows, suggesting a slew of market-rescue measures from state buying to curbs on quantitative trading has had some success in restoring investors’ confidence.

They invested a net 60.7 billion yuan (US$8.4 billion) in shares trading in Shanghai and Shenzhen through the Stock Connect programme with the Hong Kong exchange last month, according to Bloomberg data. That marked the end of 201 billion yuan worth of sales from August to January.

The return of foreign buying will add momentum to the rebound in Chinese stocks from a five-year low and fuel optimism among individual investors who follow the money.

“The comeback of foreign inflows is a reflection of the improvement in confidence among investors,” said Gong Huijing, an analyst at Wanlian Securities in Guangzhou. “This will further fuel an uptick in stocks.”

Foreign investors have been buying shares of liquor giant Kweichow Moutai. Photo: Simon Song

The CSI 300 Index has risen 11 per cent since hitting a low in early February, buoyed by direct buying by the nation’s sovereign wealth fund and additional curbs on short selling. Meanwhile, Beijing also appointed a chief to helm the securities watchdog and ratcheted up a crackdown on high-frequency trading by penalising two hedge funds that were blamed for exacerbating the sell-offs.

The return of foreign funds is one of the three prerequisites that will sustain the rally, with the other two being improving economic data in January and February and the roll out of more stronger stimulus measures and reforms, according to Daiwa Securities Group.