Across The Border | This is why Chinese stocks are expected to rise for now
As Chinese equities notched up their first fund inflows in three months, the A-shares market is expected to see an uptrend with improved risk sentiment in the coming quarter. In the short term, sectors such as property and IT may deserve more investor attention while cyclical sectors like coal and iron ore could face correction risks, analysts say.
The market outlook appears to have improved recently as the benchmark Shanghai Composite Index has risen in 10 of the past 12 sessions as of Wednesday, registering solid gains of nearly 7 per cent this month.
The recovery has boosted risk appetite, with the China and Hong Kong equity markets reporting a net inflow of US$170 million (excluding local funds) for the week ending March 9, the first weekly inflow in 14 weeks, according to data from China International Capital Corporation (CICC). During the same period, A-share exchange-traded funds (ETFs) listed overseas attracted US$9.5 million.
Since June, global investors have pulled US$24.8 billion out of China and Hong Kong equity markets as an A-share market bubble burst last summer, according to CICC data.
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Analysts said equity markets may continue to recover, with increased capital inflows in the coming quarter as policymakers have shown strong determination to shore up economic growth with a series of expansionary fiscal and monetary policies. Consequently, worries over a sharp depreciation of the yuan and a hard landing of the economy have eased.