More International Investors being Attracted by China’s Stock Market
The appetite of international investors for Chinese world beating stock market looks to be growing despite a surge in market valuations suggesting risk of a bubble. The optimism comes from improved domestic liquidity and government policies that prop up the economy and accelerated the capital account liberalization.
The Vanguard Group, the biggest US mutual fund firm announced that it will be added mainland Chinese shares to its $69 billion emerging market fund. Also the Abu Dhabi Investment Authority a wealth fund of the United Arab Emirates granted a quota of $1.5 billion to invest in China’s A-share market that will be placed under the Qualified Foreign Institutional Investor program. Based on a statement by EPFR Global a provider of fund flow and asset allocation data, the Chinese equity funds will absorbed more than $4 billion from overseas investors in a single week.
JP Morgan Chase & co. a US bank also upgraded its Chinese equities last May to overweight that places focus on information technology, healthcare, banking, insurance, real estate and infrastructure construction. The rising global interest in the A-share market came as global index provider MSCI will be announcing next week if they will include the mainland’s A-share market in its global benchmark.
Experts estimated that the inclusion will initially bring in 80 to 100 billion yuan which is comparatively small to the 2 trillion yuan capitalization of the A-share market. Benchmark Shanghai Composite Index has gained 141 percent in the past year making it the best performer in all major global benchmark indexes.