UBS, Other Foreign Investors Are Still Bullish on Chinese Stocks Despite Market Swings
Zhou Nan
DATE:  10 hours ago
/ SOURCE:  Yicai
UBS, Other Foreign Investors Are Still Bullish on Chinese Stocks Despite Market Swings UBS, Other Foreign Investors Are Still Bullish on Chinese Stocks Despite Market Swings

(Yicai) Oct. 22 -- In spite of short-term volatility, UBS Group and other major foreign financial institutions remain positive on Chinese stocks.

UBS reiterated its “overweight” stance on Chinese equities in the latest emerging markets report it sent to clients recently, citing bigger growth in operating revenue and earnings per share in China compared with India.

The medium-term outlook for Chinese stocks remains positive despite renewed China-US trade frictions, portfolio rebalancing, and profit-taking after earlier tech sector gains, according to Meng Lei, China equities strategist at UBS Securities.

Developments in the China-US trade war will have a short-term impact on China’s stock market, but the medium-term outlook remains unchanged, according to global asset manager AllianceBernstein.

The benchmark Shanghai Composite Index ended little changed today at 3,913.76, after gaining 1.4 percent yesterday. It soared to a record high 3,936.58 on Oct. 9, the day after trading resumed following an eight-day national holiday, and then see-sawed for a few days, hitting a low of 3,800.11.

The Shenzhen Component Index fell 0.6 percent to 12,996.61 today, after climbing 2.1 percent yesterday and fluctuating between 13,806.69 and 12,677.44 since Oct. 9. The tech-heavy ChiNext Index gave up 0.8 percent, ending at 3,059.32, pulling back from a 3 percent gain yesterday. It has been yo-yoing between 3,322.44 and 2,927.51 since the end of the holiday.

The Chinese market remains worth investing in, and investors can focus more on it after short-term swings, said Li Changfeng, head of fund market strategy at AllianceBernstein.

Those developments may cause short-term market fluctuations but also offer potential opportunities for long-term investors to enter the market, especially when valuations are attractive, according to US investment manager Invesco.

“China’s exports to other regions are resilient and diversified,” said Raymond Ma, chief investment officer for the Chinese mainland and Hong Kong at Invesco. “Recent data show a strong rebound in China’s global shipments, which can provide support for its economy and market sentiment.”

Industry leaders remained the top choice for foreign investors in China in the third quarter, with distillers Kweichow Moutai and Wuliangye Group and Ping An Insurance Group the most favored stocks as of Sept. 30, boasting 85, 83, and 81 foreign shareholders, respectively, according to data from Wind Information.

Bank stocks also feature heavily among foreign holdings. Seven of the top 10 Chinese mainland-listed companies by number of foreign holders were banks, Wind data also showed.

Some individual stocks saw frantic foreign buying last quarter. For example, the Shenzhen Stock Exchange halted overseas purchases of Sieyuan Electric’s shares in late July because its foreign ownership percentage reached 28.07 percent. The limit for foreign ownership in a mainland-listed company is 30 percent, with a purchase suspension triggered at 28 percent.

Merrill Lynch International became Guangdong Haid Group’s seventh-largest shareholder in the quarter, holding 12 million shares, or about 0.7 percent of the animal feed producer, as of Sept. 30, according to Haid’s third-quarter earnings report.

Editor: Futura Costaglione

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