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Foreign investment firms remain optimistic about China’s stock market outlook despite recent volatility.
The Chinese stock market continues to be an attractive investment opportunity, with analysts suggesting that investors should focus on equities after temporary fluctuations subside. According to a strategist from a global asset management company, the Shanghai Composite Index closed yesterday up by 1.4% at 3,916.33. It reached a peak of 3,936.58 on October 9, right after trading resumed post an eight-day Golden Week holiday, before experiencing some swings and dropping to a low of 3,800.11.
Meanwhile, the Shenzhen Component Index increased by 2.1% to 13,077.32 yesterday, after oscillating between 13,806.69 and 12,677.44 since October 9. The ChiNext Index also advanced by 3% to close at 3,083.72, having fluctuated between 3,322.44 and 2,927.51 since the end of the holiday.
In its latest emerging markets report, a prominent global financial firm affirmed its ‘overweight’ stance on Chinese equities. The firm highlighted that Chinese companies are exhibiting stronger growth in operating revenues and earnings per share compared to other emerging markets.
Despite headwinds like renewed China-U.S. trade tensions, portfolio rebalancing by investors, prior gains in technology stocks, and some profit-taking, the medium-term outlook for Chinese stocks remains positive, according to a securities strategist from a major global bank.
Market analysts believe that recent developments in China-U.S. trade relations might cause short-term market fluctuations but still present long-term investment opportunities, especially when valuations are attractive. A leading U.S. investment management firm pointed out China’s resilience in exports to diverse regions, with recent data indicating a solid rebound in global shipments, which supports economic growth and market sentiment.
Foreign investors continued to favor industry giants in China during the third quarter. Data shows that leading distillers and insurers attracted the most foreign shareholders, with Kweichow Moutai, Wuliangye Group, and Ping An Insurance Group having 85, 83, and 81 foreign investors respectively by September 30.
In terms of share volume, banking stocks were the most popular among offshore investors. As of the end of September, seven of the top ten Chinese companies by foreign-held shares were banks.
Certain stocks saw a surge in foreign interest. For instance, foreign purchase limits caused trading suspension for Sieyuan Electric in late July when foreign ownership hit 28.07%, close to the regulatory 30% cap. Meanwhile, Merrill Lynch International became a significant shareholder in Guangdong Haid Group during the third quarter, acquiring over 12 million shares, representing a 0.7% stake as of September 30.
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