Investors Seek Refuge In China Market

Refuge in China market for Investors

The Chinese market is feared by some and coveted by others:

  • While a significant group of capital is fleeing the Chinese market, another no less number of investors are seeking refuge in the shares and bonds of that economy.
  • There are several reasons for investors to see attractive a market that looked turbulent until weeks ago. One of them is political stability, guaranteed by a third term of Xi Jinping.
  • US inflation would be sending investors running into the arms of China. Some analysts quoted in Reuters assure that the Fed acts in a desperate way, which increases the nervousness of investors.

The stock market in the People’s Republic of China currently looks like a carousel of capital. Thus, while a group of investors fears being exposed to some actions, others place their capital there. Inflation would be one of the reasons why the country is receiving large flows into its interior.

Recently, it became known that a large number of investors left the country fleeing from real estate actions. These would be taking their money to more stable markets such as India, South Korea, Singapore and Malaysia. However, a larger group of capitals is replacing them.

According to Reuters, this is because US inflation is contagious to other markets as the Fed acts desperately. In this way, the Chinese State looks more promising for this year, so dozens of investors would be considering it as a refuge.

China Market for Investors

China market is on the mend

Although there is a lot of talk about the danger of investing in the Chinese market, many things are changing so far this year. Reforms aimed at hitting technological, health and education monopolies seem to be left behind. At the same time, companies in those sectors are beginning to recover ground, both in net income and in their performance on the stock market.

To this must be added the promises of a year of recovery, promoted by the Communist Party and followed with confidence by international investors. At the same time, the country’s political stability plays an important role by 2022, in which a popular Xi Jinping would be re-elected for a third term. To make the outlook for China even more promising, the easing of monetary and fiscal policy stands out.

Consequently, by putting these facts on the table, investors are more than willing to pump capital into that country. It is worth noting that, of the 30 most important emerging markets (EM) in the world, China is at the top of the list. Inflation, although it is a problem, has been controlled despite the recent cuts in the rates of preferential loans (TPP) at 1 and 5 years.

In any case, the Chinese market, which a few months ago was the lonely street that no one wanted to walk down, is now the destination of dozens of investors.

Beijing’s financial position vis-a-vis other EMs

For David Dali of Matthew Asia, China is the “only favorite country for 2022“. Performance is clearly outlined for this year. On the other hand, the Federal Reserve is in a stage of indecision in which plans are changed after each monthly meeting of the Federal Committee.

On the other hand, with the rest of the emerging markets, the advantages offered by China are more marked. One of them, apart from others named, is a Covid-19 free environment. The “zero tolerance” policy, seen as one of the causes for the slowing growth of GDP, seems to have its positive parts.

From this perspective, the Chinese market becomes the main target of capital, desperate due to the pandemic and inflation. “We believe that Chinese valuations are among the least risky and most attractive of all the major markets,” Dali points out.

To get a clear idea of ​​the strength of capital flows to China, just look at the results published by Morgan Stanley. According to this bank, during the first three weeks of 2022, daily income averaged $413 million.

Bond investors also have high aspirations to get into China. Finally, it should be noted that the rest of the emerging markets have losses of $9.6 billion. Simultaneously, in this field, China has a favorable balance of $10.1 billion.