China shares drawing global gaze

Rising interest in Chinese assets both at home and abroad reflects investor confidence in the development of emerging industries and ongoing capital market reforms, said experts.

The benchmark Shanghai Composite Index gained 0.96 percent to close at 3617.60 points on Tuesday, returning to the key 3600-point level. The Shenzhen Component Index gained 0.59 percent while the tech-heavy ChiNext in Shenzhen also added 0.39 percent. Combined trading value on the Shanghai and Shenzhen bourses approached 1.6 trillion yuan ($220 billion), up 6.5 percent from the previous trading day.

Telecommunication, consumer electronics, plastic products, insurance and auto parts companies led the Tuesday rally.

Chinese assets also recorded a bullish performance in overseas markets. The Nasdaq Golden Dragon China Index — a tracker of Chinese companies trading on US exchanges — at one point jumped 1.8 percent during Monday trade.

The latest data from China International Capital Corp Ltd showed that actively managed capital has returned to the Hong Kong market, the first time since October last year. This may signal a subtle change in foreign investors' strategies for exposure to Chinese assets, they said.

According to a recent UBS Wealth Management report, 19 percent of the global family offices, or firms managing wealth of ultra high net worth individuals plan to increase their investment in China area in 2025. Such firms based in the Middle East have shown the biggest interest.

Marina Lui, China head of UBS Wealth Management, said that some institutional investors, which have had underweight Chinese assets in the past, have increased their exposure this year. A lot of capital has entered the Chinese onshore market this year via the qualified foreign institutional investors program. All these reflect strong interest in China-related investment.

Chinese companies specializing in artificial intelligence, new energy and healthcare, and those generating high dividends like banks, have shown much appeal to overseas investors. The eye-catching performance of tech firms trading in Hong Kong so far this year has drawn rising attention from institutional investors, added Lui.

Zhu Liang, chief investment officer for international asset manager AllianceBernstein in China, said they hold a positive outlook on Chinese assets with longer durations given the current macroeconomic landscape. Companies providing higher dividends and those specializing in new quality productive forces, especially those with intensive intangible assets, as well as consumption companies providing new types of consumer experiences — for example mini figures and collectibles — are likely to show stronger performance, Zhu said.

More importantly, the long-term investment value of Chinese assets has been increasing, he said, adding that Chinese top regulators' requirements on improving listed companies' governance and market value management have led to more cases of companies' stock buybacks and dividend distribution. More support is being given to private enterprises, and foreign investors are thus drawn by these improvements.

But experts from China Merchants Securities said that the A-share market may fluctuate till mid-August. Some companies which have seen their prices spike in previous months may undergo some price adjustments as their latest fiscal results will be released in the first half of this month, they said.