China expects more overseas capital to flow into its markets as Beijing moves to open up its financial sector at a faster pace and as the trade war eases, bolstering investors’ confidence in the prospects of the Chinese economy, one central bank official and financial experts said on Sunday.
“It has become an important characteristic of China’s cross-border capital flow that there’s an increasing amount … flowing into China’s stock and bond markets in recent years,” Pan Gongsheng, a deputy governor of the People’s Bank of China, said.
He disclosed that overseas investors held $283.8 billion of domestic stocks as of the end of November 2019, 10 percent more than at the end of 2016.
The amount of domestic bonds held by overseas investors rose 1.6 times to $324.8 billion at the end of November 2019.
“In the future, China’s international balance of payments will be in balance, while cross-border capital inflows will grow,” Pan said.
Nearly 73 billion yuan ($10.56 billion) flowed into the domestic A-share markets via the stock connect programs between the Chinese mainland and Hong Kong in December, up by 21 percent on a monthly basis. Such inflows suggest that overseas investors might be poised to make large-scale investments into mainland stocks this year.
“There’s a trend that overseas capital is investing in A shares,” Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Sunday.
He said that A-share markets hold greater appeal for overseas investors in 2020 than in previous years, because the indicators are pointing toward a stabilizing economy and external friction is easing.
The increasing inflow of overseas capital into mainland stock markets is also pushing the A-share market into a bull trajectory.
“Overseas capital is buying domestic shares even though some shares are already at record highs. This shows that overseas investors are very optimistic about the shares of outstanding companies, regardless of current prices,” said Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management.
CNBC cited an exchange traded fund investor from US-based asset manager BlackRock as saying that he sees increasing interest in China, which he said was always a “good play” to include in a portfolio.
Lu Qianjin, a professor of international finance at Shanghai-based Fudan University, said that overseas investors are directing their capital into China to avoid risks.
He added that overseas investment, often characterized by a medium- and long-term investment model, is good for the stabilization of the domestic financial markets.
Pan also noted that China’s cross-border capital flows were generally stable in 2019 and so was the yuan’s exchange rate, compared with many other overseas currencies.