Goldman Sachs said in its latest reportCrashbandicootdarksoulsOverseas investor sentiment has picked up, and under the optimistic scenario, the A-share market has the potential to increase valuation by 20% to 40%. At the same time, UBS also issued a strategy report to upgrade China to "overweight".

Recently, a number of foreign institutions have been bullish on China's core assets, while northward capital has continued to flow back, and foreign investors have bought Chinese bonds for the seventh month in a row. Foreign-funded institutions believe that the improvement of overseas monetary environment, the prominent performance-to-price ratio of Chinese assets, positive policy expectations and other factors promote the enthusiastic repair of foreign capital, and the attractiveness of Chinese assets is expected to grow with each passing day.

Stock market and bond market

Continuous increase of positions by foreign-funded institutions

Northward capital return began in February, when northbound funds increased positions in A-share market 607 through Lugang Stock Connect (Shanghai Stock Connect + Shenzhen Stock Connect).Crashbandicootdarksouls44 billion yuan, a 13-month high. By the end of April, foreign investors had increased their holdings of Chinese stocks for three consecutive months. On April 26th, northbound funds bought 22.449 billion yuan unilaterally, the highest since the opening of the Land Port Link. According to Wind statistics, the net purchase of northward funds reached 79.086 billion yuan during the year.

Speaking about the reasons for the increase to "overweight", Sunil Tirumalai, chief global emerging market equity strategist at UBS, said MSCI China's internet EPS grew by 23 per cent and consumption by 2 per cent amid significant pressure on the real estate sector over the past 18 months. The underperformance of the Chinese stock market is mainly due to falling valuations rather than profitability or fundamental problems.

What is noteworthy is that on April 12, the State Council issued "some opinions on strengthening Supervision and preventing risks to promote the High-quality Development of the Capital Market", focusing on improving the listing standards of IPO, strengthening the supervision of delisting, improving the rules of reduction and strengthening the supervision of cash dividends. In this regard, UBS believes that this is a good structural measure to improve the overall quality of A-share listed companies and support the long-term investment deployment of the market.

In terms of bonds, Wang Chunying, deputy director of the State Administration of Foreign Exchange and spokesman, said at a news conference held by the State Information Office on April 18 that the scale of foreign investment in domestic bonds has increased significantly recently, with a net increase of US $41.6 billion in the first quarter of this year, exceeding the net increase of US $23 billion for the whole of last year.

According to statistics, from September last year to March this year, foreign investors bought Chinese bonds for seven consecutive months.

Xu Zhaoting, general manager of Deutsche Bank's China Investment Banking Department, said that since most foreign investors are increasing their holdings of short-term treasury bonds, financial bonds or interbank certificates of deposit, judging from the continuous holding pace of foreign investors and the interest rate environment, active trading institutions such as overseas commercial banks may promote foreign investors to increase their holdings in China's bond market.

"from a spread perspective, the return on investing in the Chinese bond market may be relatively low compared with the US bond market, but the return on onshore short-term bonds hedged by foreign exchange investors is still considerable, which helps to promote the return of foreign investment back to the Chinese bond market." Liu Sizhuang, head of fixed income at Goldman Sachs in Greater China, said.

Three advantages of A-share

It deserves the attention of global asset allocators.

A number of foreign-funded institutions have made it clear that they are optimistic about China's capital market.

"at this stage, A shares deserve the re-attention of global asset allocators because of the following three advantages." Lianbo fund senior market strategist Huang Senwei analysis said that the first is the overall valuation is low. Second, the marginal benefit of the reform is higher. A-share to improve the quality of listed companies and corporate governance-related policies have been issued one after another, many high-quality, abundant cash flow, stable dividend capacity of enterprises still need to be excavated by the market. Third, the degree of concentration is low and the investment opportunities are relatively wide. For example, export-oriented "China invisible champion" enterprises with increasing overseas market share, and high dividend enterprises that benefit from the domestic low interest rate environment and capital market reform policies.

Looking to the future, Meng Lei, China equity strategist at UBS Securities, believes that sentiment in the A-share market has gradually picked up. With the increase in investor risk appetite, the "high-quality growth" style is expected to slightly outperform the market in the second quarter, while the target of high dividend yields in the "value" style should still be part of defensive positions. Large-cap stocks are expected to outperform small and medium-sized stocks due to higher earnings certainty and potential long-term net capital inflows.

In terms of industry preferences, UBS is super-equipped with electronics, food and beverage, oil, coal and communications sectors. In terms of investment theme, UBS is optimistic about high-quality state-owned enterprises under the background of 'valuation system with Chinese characteristics'. " Meng Lei said.

(home Power Grid ®HEA.CN)