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As the Chinese mainland stock indexes continue their upward momentum, foreign investors maintain strong enthusiasm for onshore equities, primarily targeting industry leaders. Notable companies such as power transmission and distribution equipment manufacturer Sieyuan Electric, precision gear transmission system developer Shuanghuan Driveline, transformer tap charger producer Huaming Power Equipment, and relay industry frontrunner Hongfa Technology are among the most popular among foreign investors.
As of August 8, data from the Shanghai and Shenzhen stock exchanges indicate that their foreign ownership stakes all surpass 24 percent. The regulatory cap for foreign ownership in mainland-listed Chinese companies is set at 30 percent, with a trading halt triggered at 28 percent.
Sieyuan Electric, in particular, is nearing the ownership limit, with the Shenzhen Stock Exchange suspending foreign purchases in late July when its foreign shareholding reached 28.07 percent. Leading global institutions such as Morgan Stanley, Temasek, and Fullerton Alpha are among the top ten shareholders of these firms this year.
The recent surge in foreign ownership of mainland stocks is attributed to several factors, including expectations of a turning point in global liquidity, a weakening US dollar, and increased international capital flows into emerging markets, according to Yan Kaiwen, chief strategy analyst at Huaxin Securities. He explained that overseas investors are actively utilizing stock connect programs between Hong Kong and mainland China to invest in undervalued sectors, pushing some major stocks’ foreign ownership percentages close to the purchase ceiling.
Other industry leaders on the mainland also attracted significant foreign investment this year. For instance, at the end of June, insurance giant Ping An and liquor companies Wuliangye and Kweichow Moutai each had more than 80 foreign institutional investors, according to Wind Information data.
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