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Global equities and Chinese bond holdings have risen by about 40% to over $ 800 billion over the past year as investors bought assets at a record pace despite sharp relations between Beijing and the community. international.
The momentum in China’s markets by global investors has come despite tensions between Beijing and Washington over related issues corporate audits to Beijing’s crackdown on Uighurs in Xinjiang, which the U.S. has labeled genocide.
It has also coincided with a crackdown in Beijing Chinese listings in US capital markets, including an investigation into the data security of the specialized group Didi Chuxing, announced a few days after its listing in New York of 4.4 billion dollars.
According to calculations by the Financial Times based on Bloomberg data, foreign investors have bought US $ 35.3 billion worth of Chinese shares during the year so far through trading platforms linking Hong Kong to the Shanghai and Shenzhen stock exchanges. . This was about 49% higher compared to a year earlier.
According to Crédit Agricole data, foreign investors have also bought more than $ 75 billion in Chinese treasury during the year so far, according to Crédit Agricole figures.
The overseas purchase of Chinese securities and government bonds has increased at a faster rate than ever compared to the corresponding periods of previous years. Enthusiasm for Chinese assets has been fueled by the country’s rapid rebound from the Covid-19 pandemic, but concerns about its economic growth is slowing.
“Contrary to geopolitical rhetoric, from an asset management standpoint, one cannot help but look at the Chinese market,” said Andy Maynard, a trader at investment bank China Renaissance.
Entry into Chinese markets has increased in recent years, in part due to the inclusion of renminbi assets in stock market and global bond indices that have trillions of dollars worth of assets tracked.
In March, FTSE Russell became the latest index provider to confirm its plans include Chinese public debt in its global bond index, a measure that Nomura has predicted will allocate more than $ 130 billion to China.
This year’s bond inflows have brought total foreign holdings to about $ 3.7 billion ($ 578 billion), according to FT calculations based on figures from Crédit Agricole and Hong Kong’s Bond Connect program, a channel for foreign investors to negotiate debt issued on the continent.
Foreign investors had more than Rmb1.4tn ($ 228 billion) of land shares as of Wednesday through market links with Hong Kong, excluding other foreign investment programs.
This makes overseas investors have Chinese stocks and bonds through these channels at about $ 806 billion, up from $ 570 billion the previous year.
A global change this year far from being highly valued technological actions it has also benefited mainland China’s markets. Analysts said China’s ground actions offered better exposure to different sectors of the technology, such as industry groups.
“As technology loses favor, people want other sectors and most of those sectors are better represented on the ground,” said Thomas Gatley, an analyst at Gavekal Dragonomics.
Analysts said mainland stocks had also found favor with global investors, as Chinese stocks listed on the U.S. faced off nationwide. normative repressions.
Shares in Didi, the Chinese listed group in New York, he fell last week after Beijing opened a cybersecurity company.
In debt markets, Mansoor Mohi-uddin, chief economist at the Bank of Singapore, noted that government bonds of China offered attractive yields compared to their US counterparts.
“There is a marked difference between Chinese bond yields and U.S. treasuries,” he said, noting a 1.5 percentage point gap between the two.
Entries in China’s bond market have also accompanied a rebound in the renminbi, which touched one maximum of three years against the dollar in May.
“We would expect the interest rate differential to continue to support the [renminbi]Mohi-uddin said, helping increase Chinese equity and bond inflows during the second half of the year.
China’s central bank decision on Friday to reduce the lender’s reserve ratio of lenders further fueled offshore purchases of the country’s bonds this week.
The move, which reduced the amount of capital banks have to hold in reserve, is expected to release approximately Rmb1tn of liquidity and end the months of a tighter monetary policy in China.
But the reduction in RRR also indicated to markets that Beijing may be concerned that growth is slowing and that it came nonetheless. signs of rising inflation.
Patrick Wu, head of Asian emerging markets listed on Crédit Agricole, said the cut surprised many international bond investors, who had recently slowed down renminbi debt purchases.
“People were pretty bearish and with little weight in Chinese bonds,” Wu said, adding that offshore purchases of renminbi debt through Hong Kong had increased after the RRR reduction.
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