HONG KONG/SINGAPORE, Jan 11 (Reuters) – Foreign investors have barely begun buying back beaten-down stocks in China, but there are growing signs that the end of the country’s tough COVID-zero policy marks the beginning of a long global march back into Chinese equities.
December’s sudden shift from tight health restrictions to almost none at all by January has unleashed a wave of infections that have overwhelmed health officials and surprised financial markets, which had expected a slower transition.
MSCI China (.dMICN00000PUS) has gained a staggering 50% since November, when hopes of reopening first emerged, while Hong Kong’s Hang Seng Index (.HIS) is up 47%, against roughly 6% gains for world stocks (.MIWD00000PUS).
But participation has been narrow, with brokers and analytics firms attributing most of the gains to short-covering and fast-money — leaving lots of room for flows from slower-moving institutional investors to drive the rally further.
Shifts in tones at big banks suggest they are warming up to Chinese equities, especially as the strong returns so far and the fear of missing out on more gains start to apply pressure.
Stocks surge on reopening hopes
“The economic and market effect of that reopening is just beginning to be felt,” said Ken Peng, head of Asia investment strategy at Citi Global Wealth Investments, who expects foreign inflows big enough to lift the yuan this year.
“This is still a long path and we remain very bullish on Chinese equities …and also the currency,” he said.
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