China A-shares, North Asian markets continue to attract foreign buying, while South-east Asia lags
Angela Tan
FOREIGN fund flows into Asia stocks continued into the second week of 2023 and are expected to remain strong, with Beijing’s growth target of more than 4.5 per cent for the year underpinning China’s expansionary stance.
For the week ended Jan 13, the region saw an inflow of US$9 billion, led by strong buying in China A-shares (US$7 billion), Taiwan (US$2 billion) and South Korea (US$1 billion). India saw moderate foreign outflows of US$0.6 billion, while South-east Asia saw muted flows. Cumulatively, the region including China onshore has seen US$13 billion of foreign inflows since the start of 2023.
Sunil Koul, Asia-Pacific equity strategist at Goldman Sachs, said: “After seeing about US$70 billion worth of foreign selling in the first 10 months in 2022, emerging markets Asia is seeing a reversal, with US$35 billion inflows since November 2022, led by China A-shares (US$19 billion) and Taiwan (US$6 billion).”
South Asian market leaders from last year such as India and Indonesia have seen outflows, while laggards China and North Asia have seen strong inflows, Koul said.
Fund managers are shifting from “underweight” to “neutral” or “buy” on Chinese equities in their global portfolios after China dropped its zero-Covid protocols.
MSCI China has gained 50 per cent since November 2022, when hopes of reopening first emerged. Hong Kong’s Hang Seng Index is up 47 per cent, against a 6 per cent gain for global stocks.
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Most economists expect the reopening will see more positive momentum after March, when more policy direction is expected during the national legislative meeting, or “Two Sessions”.
On Sunday (Jan 15), Beijing set a gross domestic product (GDP) growth target of over 4.5 per cent for 2023, the city’s acting mayor Yin Yong said as he delivered the government report at the annual session of the Beijing Municipal People’s Congress.
The Chinese capital also set goals for other major economic indicators in 2023, including a surveyed urban unemployment rate of 5 per cent or less and consumer price index (CPI) growth of about 3 per cent, according to the government work report.
Beijing is projected to achieve positive economic growth and maintain steady growth of per capita disposable income in 2022, with a CPI increase of 1.8 per cent and a surveyed urban unemployment rate of 5 per cent or less, Yin said.
According to the report, Beijing will put more emphasis on restoring and expanding consumption. It will promote the planning and construction of logistics bases, strengthen building of new consumption landmarks, and support consumption in housing improvement, new energy vehicles and elderly care services, state media Xinhua said.
Beijing will also promote “100 infrastructure projects, 100 projects for improving people’s livelihood, and 100 projects for scientific and technological innovation and hi-tech industries”.
Mahesh Kedia, microstrategy analyst at Jefferies, reaffirmed China as a top pick. He saw “no let-up in China’s focus on economy along with lowering the geopolitical tensions” and believed the MSCI China could enjoy a further 21 per cent upside despite rallying since November.
Excluding A-shares, Kedia said 61 per cent of MSCI China by weight are still priced below pre-Covid levels. On price-to-earnings and price-to-book multiples, more than 80 per cent of the stocks are below that level.
The analyst also noted that almost 76 per cent of China’s “common prosperity” stocks are still priced below pre-Covid levels.
DBS said the “stars are aligning for a China-Hong Kong rebound in 2023, after a torrid 2022”. The Singapore bank is revising up China’s 2023 GDP growth forecast to 5.5 per cent and Hong Kong’s to 6.5 per cent. It expects China’s full-year 2022 real GDP to grow 2.9 per cent from 2021.
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