Incentives boosted for holding in Chinese A shares

The China Securities Regulatory Commission will strengthen incentives for fund management companies to boost holdings in Chinese A shares as the long-term return prospect of the market has improved.

Lin Xiaozheng, deputy head of the CSRC's department of fund and intermediary supervision, said on Friday it has become a consensus among market institutions that it is the right timing to boost holdings in A shares.

Lin said the fund industry shares a belief that the trend for China's economy to recover and improve remains intact while the valuations of A shares have reached a historical low, making the long-term return prospect promising for investors to boost holdings now.

The commission will work to further encourage fund management companies to increase holdings in A shares by amplifying relevant incentives and guiding them to carry out long-term investments, Lin said at a regular news conference hosted by the CSRC.

Echoing Lin's remarks, a rising number of global investment banks have turned more positive on the outlook of the A-share market, with Goldman Sachs predicting 17 percent and 19 percent price returns for the MSCI China Index and the CSI 300 Index in 2024, respectively, staying overweight on A shares.

"We think the worst is over and we have started to turn optimistic," said Meng Lei, China equity strategist at UBS Securities.

Factors underpinning the conclusion are rallying corporate earnings, supportive macroeconomic and property policies and the potential for investor sentiment to improve, Meng said.