Positives boost overseas inflows into equities

Several positives drove overseas inflows — more global investors — into China's A-share market on Tuesday, marking their rebound for the third session in a row, international investment banks and asset managers said.

Brightening prospects of the country's economic growth, reasonable stock valuations and the mitigation of uncertainties at home and abroad that bolstered investor sentiment are key factors behind the inflows, they said.

Northbound trading of the stock connect programs between the bourses on the Chinese mainland and in Hong Kong saw net capital worth 8.15 billion yuan ($1.16 billion) flow into A shares on Tuesday, marking the first time in almost a year that daily net inflow topped 8 billion yuan for three consecutive sessions.

Net inflows this month reached 34.16 billion yuan, reversing a net outflow of 28.08 billion yuan in the past three months. So far this year, a net total of 29.07 billion yuan has flowed into A shares via northbound trading, market tracker Wind Info said.

Accompanying the rebound in foreign inflows was a market rally beating many overseas peers. The CSI 300 Index — which tracks 300 shares traded in Shanghai and Shenzhen — increased by 10.18 percent so far this month to close at 3865.97 points on Tuesday, outperforming the S&P 500's 2.2 percent gain in the United States during the same period.

On Tuesday, the benchmark Shanghai Composite Index climbed by 1.64 percent to close at 3134.08 points, the first time the index ended above 3100 points since late September, with semiconductor makers and brokerages among the biggest gainers.

The ChiNext Index, which tracks China's Nasdaq-style board of growth enterprises, surged by 2.38 percent to close at 2431.73 points.

Experts attributed the recent rally to domestic factors, including the optimization of COVID-19 containment measures and ramped-up support for the real estate sector and the alleviation of external risks, including expectations that US monetary tightening might slow down.

Michael Lai, a portfolio manager at Franklin Templeton, said multiple factors conducive to a recovery in China's stock market have converged, as the country's macroeconomic policy might ease further while global geopolitical tensions have somewhat moderated.

Also in a sign that global investors are increasing exposure to Chinese equities, a US pension fund raised investments in Chinese financial assets, China Securities Journal said in a report on Tuesday.

The California Public Employees' Retirement System or CalPERS — which manages local pension and health benefits — pledged a total of $282 million to a large Chinese venture capital fund manager in the third quarter, the report said.

Meng Lei, China equities strategist at UBS Securities, said the A-share market may have already hit a trough as downward pressure on valuations has been "overdone "this year while earnings of A-share companies could recover gradually in the near future.

Supportive policies and earnings growth are expected to gradually boost market confidence, Meng said, adding that the CSI 300 Index is trading around lows seen in 2016 and 2018 but current earnings performance fares better.

The price-to-earnings ratio of the CSI 300 Index stood at 11.17 as of Tuesday, compared with the 10-year average of 12.32, according to Wind Info.