Insiders： The investment value of A shares is becoming more and more obvious, and the global capital is accelerating.

Since the second quarter of this year, with the expected recovery of China’s economic fundamentals and the improvement of liquidity, global capital has gradually paid more attention to China’s assets, including A-shares.

Insiders pointed out that the investment value of A-share market has become more and more prominent, which is due to its remarkable valuation advantage, the steady improvement of economy and the in-depth development of capital market reform.

During the second quarter, China assets, especially Hong Kong stocks, showed a strong price trend, which attracted the attention of many investors. According to statistics, in April, 2024, the Shanghai Composite Index and Shenzhen Component Index achieved the third consecutive month of growth, with the growth rates of 2.09% and 1.98% respectively. The Hong Kong stock market is even more eye-catching, with the Hang Seng Index rising for several months in a row, including 4.01% in two trading days in early May. Nasdaq China Jinlong Index also maintained an upward trend, and some constituent stocks such as Alibaba and Baidu recorded significant appreciation during this period.

In terms of capital flow, the northbound capital movement under the interconnection mechanism has attracted attention. On April 26th, the net purchase in a single day reached a record high, and the accumulated net purchase in the past three months exceeded RMB 90 billion, showing the strong interest of overseas funds in the China market.

For this phenomenon, some brokers believe that although the rebound momentum of Hong Kong stocks and A-shares stems from the increase in liquidity, the sources of funds are different. Hong Kong stocks benefit from the global demand for safe haven of capital, while A shares are more positively influenced by domestic monetary policy expectations. At the same time, the potential benefits of real estate policies and the improvement of market liquidity have jointly promoted the recovery of Hong Kong stocks.

Besides the liquidity factor, the continuous improvement of China’s economic fundamentals is regarded as the core of China’s strong asset performance. The recent Politburo meeting emphasized that despite the challenges, China’s economy has made a good start, its growth momentum has been enhanced, and the pace of expected good and high-quality development is steady. Both the GDP data in the first quarter and the manufacturing PMI index show a moderate economic recovery, which is expected to maintain a rebound momentum in the future.

International institutions are also optimistic about China’s economy. The Asian Development Bank has raised its forecast for China’s economic growth in 2024, and many financial institutions such as Goldman Sachs and Morgan Stanley have successively raised their forecasts for China’s economic growth, reflecting their confidence in China’s economic development resilience and growth potential.

In this context, the interest of foreign institutions in China stock market is increasing, UBS Securities upgraded the rating of China stock market, and the data of international capital flow showed that China stock and bond markets ushered in net foreign investment. According to the analysis of CICC, the current valuation of A shares is relatively low. Combined with the promotion of capital market reform and improvement of fundamentals, the medium and long-term opportunities in the market outweigh the risks.

Generally speaking, with the unanimous optimism about the improvement of China’s economic fundamentals at home and abroad and the emergence of A-share valuation advantages, global capital is accelerating the layout of the China market, and it is expected that the market will continue to attract international investment in the future and gradually step out of the bottom area.