Although the coronavirus cases were first reported in China, 2020 has become the year for Chinese capital markets to attract crowds of people as foreign investors rush to buy more than RMB 1 trillion worth of stocks and bonds. In dollar terms, China’s Shanghai and Shenzhen indexes are 13 percentage points higher than the S&P index this year.
Shenzhen’s GEM, which focuses on technology stocks, rose by about 59%, even surpassing the Nasdaq Composite Index. Chinese government bonds also use other sources of income to attract new fans (globally).
The inflow of $150 billion of funds is in sharp contrast to the situation in January, when the Chinese stock market was the first to feel the impact of the epidemic in the world. Investors say that the blowout is likely to continue now. Akintvi, head of Asian sovereign debt business at Aben Standard Investments, said that some people are unwilling to follow the increasing weight of Chinese securities in the global benchmark index, but this year has taught those people a painful lesson, “it is quite painful transactions for investors who are under-held.”
China’s securities market is now extremely attractive to investors due to Beijing’s further opening up of the financial system and taking decisive responses to the epidemic. China’s economy has picked up just as the rest of the world struggles to contain the virus.” On the path to recovery in the post-pandemic era, China is clearly ahead,” said Paul Colwell, head of the portfolio department of Weilai Taoyue Asia Business. “In terms of the way policymakers cope with changes in economic (difficult), monetary and fiscal policies… China is acting at a very different frequency than the rest of the world. “
As China’s growth returns to pre-epidemic levels and local consumption rises, the People’s Bank of China can keep its benchmark interest rate unchanged, while other central banks have significantly cut interest rates or launched bond projects whose yields are squeezed to nearly zero. For global investors seeking returns, this means that China is the only option today.
Goyle, macro strategist at Deutsche Bank, said that foreign investors’ purchase of onshore bonds has boosted a record appreciation of the RMB for six months, and the momentum will be further boosted next year.
Julia Howe, head of macro business in Asia at Schroeder Investment Group, believes that “global investors want to diversify their assets away from the dollar, and their suppressed demand is helping to support the Chinese currency.” The growing confidence in the RMB is also helping to ease investors’ concerns about the Chinese market.
Interest in buying (Chinese securities) further rose after Trump’s defeat laid a calmer U.S.-China relationship (foreground). Some analysts said that the introduction of vaccines worldwide may erode China’s competitive advantage as one of the few normal major export economies. But Bliske, head of UBS Asset Management Asia-Pacific, believes that China is ready for both the favorable and unfavorable conditions brought about by the epidemic, and that global capital flows to China “only accelerate”.
