Investors have given a major vote of confidence to the Chinese market. Over 80% of global investors now plan to increase their allocation to Chinese investments either “significantly or moderately” over the next year.
The threat of capital outflows is still very real. Nevertheless, investors have been willing to overlook the economic slowdown, political turmoil in Hong Kong and the trade war – for now – because China is leading in some key technology sectors, including the global race in 5G. This imminent stimulus to demand makes owning Chinese equities in related sectors compelling.
More funds are now expected to flow into the mainland stock market. Already, ‘foreignly held’ domestic renminbi equities hit a record RMB 1.769tr in September 2019. This was up 38.3% from a year earlier. Together, ‘foreignly held’ renminbi financial assets (bonds and equities) totalled an all-time high of RMB 3.953tr at the end of Q3.
Exports of telecommunication, computer & information services have surged. China is gaining competitiveness vis-à-vis key export competitors, notably the EU and ASEAN neighbours. The early lead in 5G will provide a big boost for manufacturers too in the race for automation, notably smart robotics.
