Chen Li: According to feedback from foreign investors, overseas capital will continue to increase their holdings in China
Soochow Chen and Li learned some feedback from foreign capital on the current Chinese stock market. The overall conclusion is that overseas capital will continue to increase their holdings in China.
- On Tuesday, after the monetary policy news conference, A-shares and Hong Kong stocks rose. During this period, short positions in Hong Kong increased, and some hedge funds believed it was just a "National Day" rally.
- On Tuesday, the first conference call at Goldman Sachs trading desk was optimistic but not significant. The information transmitted by various foreign banks' trading desks was cautiously optimistic.
- On Wednesday, the market continued to soar, with new short positions completely closed out. Investors began to believe that policy fundamentals would drive a rebound in fundamentals.
- On Thursday, the continuous rise caused a severe impact on neutral hedging strategies in the market, forcing most hedge funds to close out short positions at a large loss. This not only involved the short covering of HKChina positions but also put pressure on emerging market funds. Strategies that were long Japan/India and short HKChina suffered immense pressure and were forced to reverse. It can be estimated that mainstream Asia-Pacific hedge funds have suffered significant losses in the past week.
- The significant increase in overseas Chinese assets this week was mainly driven by the disappearance of short positions by hedge funds.
- After the easing of monetary policy, details of fiscal stimulus measures have been gradually spreading, and more and more overseas capital is beginning to believe that nominal GDP growth will continue to rise after the fourth quarter. Although many are still awaiting policy details, there is observable sustained inflow of foreign capital.
- In fact, the inflow of overseas funds into Chinese assets (mainly Hong Kong stocks) began in early August, starting at the peak of Fed expectations, and has continued for seven consecutive weeks. Recently, the inflow rate has significantly accelerated.
- There will continue to be foreign capital inflows into Chinese equity assets in the future