Since 2024, foreign capital has returned to China, and overseas listed Chinese ETFs have significantly attracted gold. Institutional sources said that some overseas investors may take the lead, grab funds when the tide is low, and lay out Chinese ETFs.

Information from ETF tracking website ETF.com shows that since 2024, as of February 27, 2024, the overseas listed Chinese internet ETF KWEB has attracted net capital inflows of US$294 million, second only to YINN, an ETF that tripled in the FTSE China 50 Index. Meanwhile, YINN attracted a net capital inflow of US$315 million. Meanwhile, FXI, which tracks FTSE China 50, attracted net capital inflows of US$84.42 million over the same period. The top three ETFs in terms of gold absorption are high on the internet.

Institutional sources believe that this may reflect the preference of overseas capital for the Chinese market: they think that after continuous adjustments, the valuation of Chinese Internet companies is very attractive.

Looking at it for a long time, KWEB, the former “influencer ETF,” seems to have regained momentum. On February 8, 2024, the day before the Spring Festival, KWEB attracted a net inflow of more than 200 million US dollars in a single day. This is KWEB's largest single-day net capital inflow since June 9, 2022, and hit a record high in a year and a half.

As of February 27, KWEB has become the largest Chinese stock ETF listed in the US, with the latest scale reaching US$5.47 billion. At one point, the scale of KWEB's “heyday” exceeded 9 billion US dollars. Although the current scale is still far from its peak, the recent active inflow of capital shows signs of recovery.

Currently, there are 6 Chinese stock ETFs listed in the US that exceed 1 billion US dollars, namely KWEB-tracking China Internet Index, MCHI-tracking MSCI China Index, FXI-tracking FTSE China 50 Index, ASHR tracking the Shanghai and Shenzhen 300 Index, and YINN triple the FTSE China 50 Index. After an active inflow of capital, YINN, an ETF that tripled the FTSE China 50 Index, recently surpassed the $1 billion mark. In overseas markets, it is generally believed that exceeding 1 billion US dollars can be regarded as a large-scale fund product.

J.P. Morgan Chase: Emerging Market Value Investors Increased Interest in the Chinese Market

Liu Mingdi, chief Asian and Chinese stock strategist at J.P. Morgan Chase, was interviewed by Bloomberg a few days ago. When asked if he could participate in the recent A-share market, he said that it is possible to participate selectively. Liu Mingdi said that the index also has some room for growth. Whether it's the Shanghai and Shenzhen 300 Index or the MSCI China Index, their current positions are below J.P. Morgan's “pessimistic position.” Next, investors will pay attention to the company's profit situation and subsequent policies.

Over the past period, the company's free cash flow has continued to improve. Also, current stock valuations are attractive. Liu Mingdi pointed out that the flow of funds from overseas registered Chinese funds is improving, outflows are slowing down, and inflows are gradually returning. She said that value-oriented investors in emerging markets are picking up interest in the Chinese market. Because of many signals, the value of the Chinese market is highlighted.

Earlier in 2024, Mark Mobius, known as the “Godfather of Emerging Markets,” also said in an interview that some companies in China have now met his stock selection requirements. Mark Mobius has introduced his stock selection framework on several occasions, namely return on capital, debt situation, profit growth, and stock liquidity levels.

When talking about Hong Kong stocks, Mark Mobius said that people are beginning to compare mainland China, Hong Kong, Indian markets, etc. Because the Indian market has risen too much up to now, people wonder if the opportunity for the Hong Kong market has arrived. “I'm not saying this will happen, but people are beginning to pay attention to the difference between the Hong Kong market's valuation and the Indian market's.” Mark Mobius said that some Hong Kong stocks have begun to meet his stock selection criteria.

Referring to the mainland China market, he said that the mainland market is driven by domestic investors rather than international investors. When real estate risks are over and domestic investor confidence is restored, the market will also rebound. This will take some time, because most Chinese people still have their main assets in real estate.

Mark Mobius said investors who are concerned about the Chinese market should pay attention to US interest rates. Interest rates in the US have declined, and emerging markets are profiting well, and China, as part of emerging markets, is no exception. He believes that interest rates will decline later this year or next year. Mark Mobius explains that he is more inclined to extract value from individual stocks rather than betting on indices.

Allianz Investments: Exploring the value of Chinese stocks from the bottom up

Chen Zhiqiang, chief investment director of Allianz Investments Asia Pacific Equities, said that China's stock market valuation is currently low, and when signs of macroeconomic improvement become more obvious, stock market valuations are expected to stabilize. Recent policies can support the macro environment in the short term and help boost market sentiment.

It is worth noting that the current global market views on China do not take into account the factors driving the long-term growth of the Chinese economy. Therefore, he believes that adopting a bottom-up strategy is the key to exploring investment opportunities in Chinese stocks.

Editor/Jeffrey