Source: Broker China
Good news for both foreign investment and RMB!
Currently, foreign investors are actively allocating RMB assets. According to the latest data from the State Administration of Foreign Exchange, in April, overseas investors made net purchases of 124.7 billion yuan of domestic bonds and 45.1 billion yuan of domestic stocks. At the same time, there is good news about RMB: The Hong Kong Monetary Authority said it will expand the scope of the digital yuan cross-border payment pilot in Hong Kong.
Furthermore, foreign investors are also boosting Chinese assets. Morgan Stanley, UBS, and Barclays have raised JD's target prices one after another. Other data shows that in the first quarter of this year, many foreign-funded institutions bought Chinese securities or related ETFs in a big way, showing confidence in the future of Chinese assets.
In the secondary market, Northbound Capital continued to buy a large amount of A-shares, making a significant net purchase of 13.956 billion yuan on May 17. Since the beginning of the year, the net purchase amount of northbound capital has reached 87.8 billion yuan. This figure is double that of the whole of 2023, and is also close to 90 billion yuan in 2022.
Foreign investors look at Chinese assets
Foreign investors are using real money to bottom up Chinese assets.
According to the latest data disclosed by the State Administration of Foreign Exchange, net purchases of domestic bonds and stocks by overseas investors in April were 124.7 billion yuan and 45.1 billion yuan respectively.
On May 17, Northbound Capital made a significant net purchase of 13.956 billion yuan. Changjiang Electric Power, Ningde Times, Poly Development, COSCO Maritime Control, and Ping An of China received net purchases of 600 million yuan, 594 million yuan, 530 million yuan, 429 million yuan, and 416 million yuan respectively. China Merchants Bank also received a net purchase of 308 million yuan, and Wuliangye received a net purchase of 281 million yuan.
This is also the second consecutive day of net purchases by Northbound Capital. The net purchase amount for the previous day was 6.067 billion yuan. Not long ago, there was a net inflow of capital to the north of 22.449 billion yuan on April 26, setting a new historical record of net inflows in a single day since the launch of Mainland Stock Connect. Statistics show that from January 1 to May 17, 2024, the net purchase amount of northbound capital reached 87.8 billion yuan, more than double that of 43.7 billion yuan for the full year of 2023, and 90 billion yuan for the whole of 2022.
It is worth noting that sovereign wealth funds such as the Abu Dhabi Investment Authority and the Kuwait Government Investment Authority are increasing A-share positions through the QFII channel. According to Wind data, the Abu Dhabi Investment Authority made moves to increase positions in Tonghua Dongbao, Hongfa Co., Ltd., Wanfu Biotech, Health Yuan, Huafeng Chemical, etc. in the first quarter of this year. The agency also joined the list of the top ten tradable shareholders of various companies such as BOE A and Beauty Beauty.
The Kuwait Government Investment Authority increased its holdings in companies such as Bethany, Songyuan, Chenguang, Sinotruk, and Xinji Energy in the first quarter, and also added the top ten tradable shareholders of more than 10 companies, including Kanghong Pharmaceutical and Shennan Circuit.
China Securities are also being watched by Wall Street. On May 17, Morgan Stanley, UBS, and Barclays Bank raised JD's target prices one after another. Among them, Barclays Bank raised JD's target price from 39 US dollars to 41 US dollars, Morgan Stanley raised JD's target price from 25 US dollars to 28 US dollars, and UBS raised JD's target price from 37 US dollars to 40 US dollars.
According to UBS, JD's adjusted net profit for the first quarter increased 17% year-on-year to 8.9 billion yuan (RMB), exceeding expectations, mainly due to strong gross profit from JD retail and loss to profit from JD Logistics. UBS expects JD's total commodity transaction volume (GMV) to achieve double-digit growth in the first quarter and remain strong in April. By business division, the department store product business was the highlight of the first quarter. The year-on-year growth rate accelerated to 8.6%. I believe the strong momentum will continue. UBS raised the adjusted net profit forecast for JD 2024 to 2026 by 3% to 4%, raised the adjusted earnings forecast per share by 6% to 8%, raised the target price for JD US stocks from $37 to $40, and raised the target price for H shares from HK$144 to HK$156, maintaining a “buy” rating.
The RMB ushered in a favorable situation
On the afternoon of May 17, the RMB also received positive news. On the same day, the Hong Kong Monetary Authority of China announced on its official website that the Hong Kong Monetary Authority and the People's Bank of China have achieved further results in cooperation on the digital yuan cross-border payment pilot, expanding the scope of the digital yuan pilot in Hong Kong, facilitating Hong Kong residents to open and use digital yuan wallets (digital currency wallets), and recharge digital currency wallets through “FPS” (FPS, a fast payment system launched by the Hong Kong Monetary Authority).
At the same time, the interoperability of “Fast Transfer” with the digital yuan central bank system operated by the Digital Currency Research Institute (Institute of Mathematical Research) of the People's Bank of China is also the world's first fast payment system to the central bank's digital currency system, providing an innovative use case for the interoperability emphasized in the G20 cross-border payment blueprint.
According to reports, expanding the digital yuan cross-border pilot project in Hong Kong is one of the six “three links, three convenience” measures announced by the People's Bank of China at the beginning of this year. With this expansion of the scope of the pilot, users can now open and use a personal digital wallet in Hong Kong using only a Hong Kong mobile phone number. Digital wallets can be used for cross-border payments, but they cannot be used for transfers between individuals. Hong Kong users can top up their wallets through 17 retail banks in Hong Kong via “Fast Transfer”. In addition to being used in the Greater Bay Area, the digital yuan can also be used in other pilot regions in the mainland. Digital yuan and traditional electronic payments in mainland China are currently working to exchange barcodes, and Hong Kong residents will also have more spending options in the future.
Yu Weiwen, Chief Executive of the Hong Kong Monetary Authority, said, “We are delighted that Hong Kong is the first cross-border pilot of digital yuan. It is the first region outside the mainland where local residents can open digital currency wallets. The digital yuan has expanded the scope of the pilot in Hong Kong and made full use of the advantages of “fast transfer times”, so that users can add value to digital currency wallets anytime and anywhere without opening a mainland bank account, making it easier for Hong Kong residents to spend in the mainland. We will continue to work closely with the People's Bank of China to gradually expand the scope of application of digital yuan, enrich the digital currency wallet functions that Hong Kong residents can use, and promote more retailers to accept digital yuan to facilitate cross-border retail payments for residents of the two places.”
The Hong Kong Monetary Authority said that the use of digital yuan will provide Hong Kong and mainland residents with an additional safe, convenient and new cross-border payment option, enhance the efficiency and user experience of cross-border payment services, and help promote connectivity in the Guangdong-Hong Kong-Macao Greater Bay Area.
Proposed shares to be added
The US Securities Regulatory Commission's 13F report shows that in the first quarter of this year, many foreign-funded institutions bought Chinese securities or related ETFs in a big way, showing confidence in the future of Chinese assets.
By the end of the first quarter, Bank of America had purchased 5.18 million new shares of JD shares, bringing its market value to 180 million US dollars; bought 2.91 million Pinduoduo shares, with a market value of 474 million US dollars; and bought 5.86 million Alibaba shares, with a market value of 715 million US dollars. In addition, BlackRock bought 77 million shares of New Oriental ADR in the first quarter of this year, and Goldman Sachs and Assenagon asset management companies significantly increased their positions in Pinduoduo in the first quarter.
Appaloosa, a hedge fund owned by David Tepper, a well-known American billionaire investor and hedge fund legend, bought 6.9 million Alibaba shares in the first quarter, increasing its total holdings to 11.25 million shares. Alibaba also became its largest stock. The fund also increased its holdings by 1.32 million shares of Pinduoduo and 1.17 million shares of Baidu, and also opened positions with JD and two Chinese stock ETFs listed in the US — KraneShares CSI China Internet ETF (KWEB) and iShares China Large Cap ETF (FXI).
Scion Asset Management, a hedge fund owned by Michael Burry (Michael Burry), the prototype of “The Big Short,” also increased its holdings of JD and Ali in the first quarter, and also increased its Baidu ADRs (American Depositary Receipts) holdings by 4.2 million dollars. According to information, JD currently holds the largest position in the fund's investment portfolio, and Ali is the second most heavily held stock.
Citron Research (Citron Research), an agency famous for doing aerial stock listings in the past, also posted a lot about Alibaba on social media. Citron said that Alibaba is gaining momentum, and the stock price is expected to rise above $100. Investors will recognize Ali's AI cloud prospects and strategic investments.
CICC analysts Li Zhao, Qu Botao and others pointed out that China's stock index has risen again recently, and the reallocation of overseas capital may play an important role. Fluctuations in US economic data and interest rate cut expectations increased in April. The VIX Volatility Index rose, and the yen depreciated at an accelerated pace against the US dollar. Weakening overseas markets may push some global capital profits to settle, and capital allocations to lighter and less valued Chinese assets. Under the macro combination of improving China's growth expectations and global capital reallocation, the A-share recovery market is expected to continue. It is recommended to focus on high dividends, upstream resources, and growth style sectors.
editor/tolk