ASEAN, Mid-East institutions eye China stocks as West retreats
As US and European institutional investors pull back from China, their counterparts in Southeast Asia, the Middle East, and other regions are increasingly turning their gaze towards the world’s second-largest economy. Despite concerns over Chinese stock market transparency and policy signals, investors worldwide are still showing interest in China’s market potential.
William Fong, head of Hong Kong China equities at Barings, highlighted that while interest from the US and Europe has decreased, investors from ASEAN countries, the Middle East, and South Africa are actively exploring opportunities in China. Before making significant allocations, these institutional investors are closely monitoring China’s macroeconomic indicators, regulatory environment, and potential policy support for various sectors.
Although Chinese stocks are currently trading at historically low valuations, investors remain cautious and are waiting for concrete signs of economic recovery before increasing their exposure. The recent halt in daily disclosure of foreign inflows into onshore equities by Chinese exchanges has added to the uncertainty surrounding investments in China.
Despite the challenges, investors are optimistic about the potential benefits of reallocating assets to Chinese equities. Lower interest rates and a more resilient renminbi could attract capital flows to China, especially as investors seek higher returns in a low-rate environment. Additionally, ongoing domestic stimulus measures and policy support from the Chinese government are seen as key drivers for the market’s performance.
While some investors view China as a diversification opportunity, others are monitoring the country’s economic indicators and policy developments closely before making significant investment decisions. The market is still waiting for major stimulus measures from Beijing, with concerns about the efficacy of existing policies in stabilizing the economy.
In a rapidly evolving global economic landscape, institutional investors are weighing the potential benefits of investing in Chinese equities against ongoing headwinds such as geopolitical tensions and domestic challenges. As investors navigate these uncertainties, the interest in China’s market potential remains strong, with a focus on understanding the evolving macroeconomic landscape and policy environment to make informed investment decisions.
