European institutions and fund selectors displayed positive sentiment for Chinese equities and bonds in research published this week, attracted by the country’s monetary policy – but less sure on valuations.
Many expected foreign investment in Chinese equities to increase, while positive yields were highlighted as an attraction for bonds.
Asset manager China Post Global and fund distributor NTree International collaborated on the research that canvassed 150 investors worth $292.8 billion.
Key findings were:
- 75% expected foreign investment into China equities to increase in Q1 2021.
- 41% said China equity valuations were “fair” (48% said “slightly overvalued” and just 9% said “undervalued”).
- 42% said the positive returns from Chinese bonds compared to negative yields elsewhere was the most important factor in fixed income.
- 30% highlighted China’s relatively normal monetary and fiscal policies as an attraction to the country’s markets.
A smaller percentage of investors (about 7% for each answer) highlighted either positive economic indicators, strong capital growth in Chinese equities, or the fact that the Chinese market has become more liquid, as their most important considerations.
Danny Dolan, director at China Post’s ETF business, Market Access, said: “Chinese equities have performed extremely well during the global pandemic, demonstrating again China’s low correlation to other major markets. China’s equity market has risen 30% over the past 12 months and continues to attract investment from overseas institutional investors.”
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