The heightened enthusiasm of overseas long-term capital for Chinese assets has become increasingly evident, with multiple authoritative global institutional data releases recently confirming this trend.
Latest data from Goldman Sachs Research shows that in August, global hedge funds' net purchases of Chinese assets reached their highest level since September last year, with hedge funds' gross positions in China hitting a two-year high. The Institute of International Finance (IIF) latest report reveals that foreign investors poured nearly $45 billion into emerging market equity and bond portfolios in August, marking the largest scale in nearly a year. Among this, funds flowing into Chinese market portfolios accounted for the major portion, with China's bonds and equities recording a combined net inflow of $39 billion in August.
Experts interviewed stated that this capital inflow not only reflects expansion in volume but also demonstrates international capital's systematic revaluation of China's economic fundamentals and medium-to-long-term growth potential. As long-term capital enters the market significantly, research activities have become increasingly frequent, showing that foreign capital is conducting strategic positioning based on in-depth research. "Buying China" is evolving from a trading opportunity to a structural trend.
**Transformation from Perspective to Action**
On September 11, Morgan Stanley released a report stating that U.S. investors' interest in Chinese stocks has reached its highest level in five years, and their return to the Chinese market has just begun. Morgan Stanley's Chief China Equity Strategist Wang Ying indicated in the report that more capital may flow into the Chinese market in the future.
This viewpoint is not isolated but represents a microcosm of foreign capital's generally optimistic expectations for the Chinese market. On August 6, Kuang Zheng, Chief Investment Officer of HSBC Private Banking and Wealth Management China, expressed a "positive view" on Chinese stocks. On August 7, S&P Global released a report maintaining China's sovereign credit rating at "A+" with a "stable" outlook, demonstrating S&P Global's confidence in China's stable and positive economic development prospects. On August 22, Goldman Sachs published research indicating that the current rally in Chinese stocks is mainly driven by retail investor funds, but there remains upside potential as substantial "existing funds" have yet to enter the market, with particular optimism for small and mid-cap performance.
More notably, foreign capital's "high confidence" in Chinese assets has genuinely transformed from the perspective level into actual action. On one hand, foreign institutions have increased their research efforts in the Chinese market. Numerous internationally renowned investment banks and asset management institutions have frequently dispatched teams to China for in-depth field investigations of listed companies across various industries, conducting deep exchanges with corporate management to thoroughly understand business operations and industry development trends, accumulating evidence for subsequent investment decisions.
Zeng Xiaosong, Founder and Investment Committee Chairman of Hong Kong OKAY Fund Management Group, stated in an interview that through deep participation in A-share listed company seminars and multiple rounds of on-site research this year, the team has gained more intuitive and definitive insights into Chinese enterprises' development potential. Based on this judgment, the team has completed investment positioning in 8 A-share companies this year and plans to conduct on-site research of more than 10 additional listed companies to further identify quality targets.
On the other hand, foreign capital is adding to Chinese assets with real money. For example, Goldman Sachs' latest report shows that during the four weeks from August 6 to September 3, global equity funds received net inflows of $63.59 billion. Emerging market funds recorded net inflows of $5.521 billion, of which Chinese domestic equity funds collectively received net inflows of $6.55 billion, leading among emerging markets.
Yang Delong, Chief Economist at Qianhai Open Source Fund, stated that currently, global capital is undergoing rebalancing, with some funds flowing out of U.S. stocks toward other major capital markets. A-shares and Hong Kong stocks, as valuation lows among global major capital markets, possess strong allocation value, attracting substantial foreign capital inflows. Particularly in the technology sector, China's significant progress in artificial intelligence, semiconductors, 5G communications, and other areas has shown foreign capital broad development prospects. In the first half of this year, foreign capital inflows into A-shares have exceeded $10 billion, and the pace of future inflows will accelerate.
**Consensus on Long-term Value of Chinese Market**
In fact, the continuous influx of overseas long-term capital into the Chinese market is not impulsive short-term trading behavior but based on deep recognition of the Chinese market's long-term value. From macroeconomic resilience to industrial development potential, from policy support strength to market openness, the Chinese market is becoming a certainty choice in global capital's eyes through multi-dimensional attractiveness.
First, China's economic fundamentals continue to improve, providing solid reasons for foreign capital inflows. Since the beginning of this year, China's economy has demonstrated strong resilience in a complex global environment, with multiple economic indicators steadily recovering.
Zhang Demao, Chief Investment Officer at Fuqiaoxin Capital, stated that compared to other major global market assets, Chinese assets have shown particularly outstanding anti-volatility capabilities. Under the continuous impact of global geopolitical conflicts, supply chain disruptions, and other "black swan" events, China has been able to effectively resist external shocks through its comprehensive industrial system, vast domestic demand market, and flexible policy adjustment advantages.
Second, a series of policy dividends for stabilizing the economy and promoting openness continue to be released, creating a higher-quality investment environment for foreign capital. Since the beginning of this year, the Chinese government has successively introduced multiple policy measures, focusing both on stabilizing the macroeconomic fundamentals and optimizing foreign investment experience.
In Yang Delong's view, the fourth quarter may still see the introduction of growth-stabilizing policies to boost consumption, drive investment, and improve economic data. The current capital market strength has laid the foundation for boosting consumption and investment confidence. Next, fiscal policy may become more proactive, and monetary policy may continue to be moderately accommodative, playing an important role in consolidating the real estate market's stabilization and recovery and the stock market's positive development momentum.
Furthermore, the valuation advantages of Chinese assets have become increasingly prominent in global markets, becoming an important inducement for foreign capital's "bottom-fishing" positioning. Currently, major global capital markets show clear valuation differentiation, with U.S. stocks at historically high valuation ranges after years of gains, while A-share and Hong Kong stock markets remain at historical lows.
According to Wind data, as of now, the Shanghai-Shenzhen 300 Index P/E ratio is approximately 14.31 times, and the Hang Seng Index P/E ratio is approximately 11.97 times, both lower than the S&P 500 Index (approximately 30.37 times) and Nasdaq Index (approximately 48.47 times) valuation levels, possessing significant safety margins and upside potential.
The superposition and resonance of multiple factors not only make "buying China" a current consensus among global capital but are also expected to drive this trend toward long-term and normalized development. As China's economy continues to recover, policy dividends are continuously released, and market openness further improves, more overseas long-term capital may flow into the Chinese market in the future.