Fund managers are reallocating funds from other Asian markets to Chinese stocks, expecting them to be the "winners" of the year. This shift is supported by a series of favorable policies from China, leading to significant gains in the A-share market, which have caught the attention of global investors.
Recently, capital flows have started moving back to China from other Asian markets like Japan and Southeast Asia. In the previous weeks, stock markets in South Korea, Indonesia, Malaysia, and Thailand experienced net outflows, with over $20 billion exiting the Japanese market in September alone. Strategists from BNP Paribas have noted that foreign investors are reducing their positions in Japan, reallocating funds to Chinese markets.
Investment managers from firms like Singapore's Atlantis Investment Management are reducing long positions across various Asian markets to free up capital for Chinese equities. They believe this policy-driven recovery presents an opportunity that cannot be missed.
Despite recent gains, Chinese assets remain attractively valued. The MSCI China Index has surged over 30% from its recent lows, yet its expected price-earnings ratio of 10.8 times is below the five-year average of 11.7 times. According to EPFR data, global mutual fund allocations to Chinese stocks were at a ten-year low of 5% by the end of August, indicating potential for increased holdings.
Singapore-based SGMC Capital Pte's fund manager projects that the Chinese stock market could be the year's best performer, with funds possibly shifting from Japan or India by the end of 2024. The current upswing is difficult to ignore.
Moreover, a Bloomberg survey highlights that U.S. hedge fund Mount Lucas Management has taken a bullish position in Chinese ETFs. Meanwhile, Singapore's GAO Capital and South Korea's Timefolio Asset Management are investing in Chinese blue-chip stocks.
