Overseas investors pumped $13bn into Chinese stocks last month, the most in at least two years.
Growing optimism over the nation’s currency and economic outlook fuelled the inflows, with $3bn also plowed into Hong Kong shares and $1.6bn into the city’s bonds, the most in EPFR Global data going back to January 2016.
Hong Kong’s Hang Seng Index jumped the most since April 2015 last month to hit an all-time high, while the Shanghai benchmark rallied the most in almost two years.
That these markets are rallying – especially Hong Kong – is nothing new, but the inflow figures show foreign investors are being drawn to the gains as the dollar’s retreat supercharges the yuan and the world’s second-largest economy charts a steady course. China’s currency is edging back towards levels not seen since it was devalued in 2015 and equity valuations remain below those of many developed-market peers.
“Investors are re-balancing their portfolios after a very strong run in US equities to markets that offer compelling valuations such as Hong Kong and mainland Chinese equities,” said Brendan Ahern, chief investment officer at Krane Funds Advisors in New York, which offers US exchange-traded funds investing in Chinese shares. “Valuations are at a discount relative to their US equivalents while Chinese economic data have been quite strong.”
But the rush of cash also raises the question of whether foreign funds have entered too late. Hong Kong’s advance started to show signs of faltering late last month, while Shanghai shares have fallen 2.7% since reaching a two-year high on January 24.
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