Long-Term Investors Flock Back to China as Confidence in Market Stability Grows

Long-term investors are making a notable return to the Chinese market, marking a significant shift in the investment landscape. According to sources familiar with the development, several institutions have recently acquired shares in BYD and Baidu's exchangeable bonds. This movement reflects a growing confidence in the stability and sustainable growth potential of China's stock market.

Goldman Sachs has observed that the current upward trend in China's stock market is underpinned by innovation and the predictability of Chinese regulations, suggesting that these factors will contribute to a more sustained market rise. Analysts highlight that valuations and the fundamentals of Chinese companies are increasingly influential in foreign investment decisions.

Significant activity has been noted among overseas investors who are positioning themselves in China stocks for the long term. Informed sources report that internationally reputed institutions known for maintaining 'long-only' positions have recently entered the Hong Kong stock market, purchasing stocks of companies such as BYD and Mixue Ice City, along with new baidu exchangeable bonds linked to Trip.com.

Andy Wong, head of IPO advisory at SW Hong Kong, explained that long-term investors, characterized by relatively prolonged investment horizons, are less likely to engage in immediate asset liquidation after acquisitions. Their involvement tends to offer stock price stability, contrasted with the volatility often introduced by short-term investors.

Phyllis Wang, head of the Asian Equity Capital Markets Syndicate at goldman sachs, remarked on the scale of these investment transactions, reminiscing the levels seen back in 2021, and continuing to express optimism about China's market prospects. Despite recent global stock market sell-offs, market observers remain hopeful about China's stock market trajectory.

Goldman Sachs strategist Kinger Lau noted enhanced engagement from global funds in China’s capital markets, which includes IPOs and stock placements. The heightened participation is attributed partly to increasing allocations in Chinese stocks driven by volatility in the U.S. market and China’s technological advancements alongside diminishing regulatory uncertainties.

Goldman Sachs emphasized that the recent rise differs from last September's temporary upticks, citing innovation and business growth as key drivers providing enduring momentum for recovery. Barry Wang from Oberweis Asset Management suggests that while global investor interest is improving, there remains selectivity, with attention to valuation and business fundamentals being crucial for investment decisions.