(Yicai Global) Oct. 31 -- Investors should not be concerned about the recent outflows of foreign capital, one of the key forces driving China's mainland stock markets, according to a chief economist.

Overseas investors sold more mainland stocks than they bought during some trading days of this month, Li Zongguang, chief economist at China Renaissance, said to Yicai Global. But between Jan. 1 and Oct. 28, net sales of stocks listed on the two mainland bourses of Shanghai and Shenzhen via the Stock Connect program with Hong Kong reached about CNY48.2 billion (USD6.8 billion). 

Offshore investors' sales of mainland stocks may be related to sporadic Covid-19 outbreaks, a mismatch between the Chinese economic cycle and that of the United States, as well as changes in policy expectations, Li said. "We should view overseas capital outflows in a comprehensive and dialectical manner." China is set to keep opening up as a recent report of the 20th National Congress of the Communist Party of China shows pledges for deepening reforms.

Mainland markets fell last week, with the SSE Composite Index down 4.1 percent and the SZSE Component Index ending the week 4.7 percent lower. Overseas capital already began to flow into the mainland via the bourse connectivity program in the last trading days of this month, Li said. Net inflows into the mainland amounted to CNY1.64 trillion (USD225.8 billion) as of Oct. 28 since the opening of the Stock Connect in 2014,  close to an all-time high. History shows cases of rebounds after brief lulls, he added.

The so-called industrial capital, which includes major shareholders and executives, made up the largest portion of institutional investors in China's mainland markets with a 34.2 percent share as of Dec. 31, 2021, per statistics from GF Securities. Mutual funds were No. 2 at 5.2 percent, insurers came in third at 3.1 percent, and foreign investors were No. 4 at 2.4 percent. Since 2012, institutional investors have expanded their mainland positions, with overseas capital logging the biggest increase.

Editors: Liao Shumin, Emmi Laine, Xiao Yi