BEIJING — International investors are putting more money into Chinese stocks, even as local investors have remained cautious on the mainland markets.

Mainland Chinese stock funds saw net inflows of $16.6 billion in January — only the fourth time since the pandemic that monthly inflows have exceeded $10 billion, according to research firm EPFR Global. This was in addition to nearly $11 Billion in net inflows from December.

Cameron Brandt (director of research, EPFR) said last week that “investor interest has increased in China going into the fourth quarter last year.” “The driver there I think is a perception — especially among institutional investors — that in the emerging markets space, China is, for a variety of reasons, something of a safe play this year.”

Brandt explained that this latest wave is more likely to be from institutional buyers than the retail investors who lost interest in China since late last year.

This divergent interest is called global investment firms have turned increasingly positiveThe last few months have seen a significant increase in mainland Chinese stock prices.

Analysts speculate that Beijing hopes to achieve growth within the next year. This is partly because the Chinese Communist Party, the ruling party, will choose its next leaders in an autumn national congress. The President of the United States was also present at this meeting. Xi JinpingExpected to be elected for a third time.

“Everything must look perfect.” [such]”This is a huge event,” Jason Hsu (chairman and CIO at Rayliant Global Advisors) said last week in a telephone interview. This is the most favorable sentiment you can get for anyone who is rationally invested.

China is also a “good contrarian bet” because it enters a phase of stimulation and easier policies, which will help the economy. U.S. Federal ReserveStarts a tightening cycle, Hsu said.

Bernstein and Goldman Sachs were so confident that they both released reports in the past few weeks, recommending stocks from mainland China.

These positive calls are made despite concerns about whether regulatory uncertainty could have rendered those stocks “uninvestable.”

In a 89-page report, Kinger Lau, Goldman’s China Equity Strategist, and his team stated that China A shares (a US$14tn assets class) have become more investmentable due to ongoing liberalizations and reforms in China capital markets.

Beijing cracked down in the past 18 months. alleged monopolistic practices by Chinese internet companiesAnd property developers’ high reliance on debtThis is among many other problems. Investors around the world have been shocked by abrupt changes in policy.

EPFR data revealed that global emerging market funds are now turning to India.

Brandt stated that managers of diversified funds are less interested in China than other markets.

Brandt reports that China’s average allocation has dropped from 35% to 27% in the third quarter 2020 to 27% by January 1. Brandt also reported that India was allocated 8.5% to 12.7% in the same period.

Indix giants are a sign of the maturing market. MSCI decided in 2018 to add some China A-sharesTo the benchmark MSCI Emerging Markets Index. This forced the international index funds to purchase more A shares. However, mainland investors continue to dominate.

Sylvia Sheng from the global multi-asset strategist of J.P. Morgan Asset Management said Monday that weak onshore sentiment and better opportunities in developed market have led to J.P. Morgan Asset Management having a neutral opinion on Chinese stocks.

According to her, if the growth rate improves in Q2, sentiment may turn. She also noted that “We actually want to be more positive about Chinese equities.”

The Shanghai compositeAfter a one-week-long holiday for Lunar New Year, the index is now up by 3%. The index had kicked off the year with a decline of 7.65% in January — its worst month since October 2018. In comparison to last year’s 4.8% gains, the index experienced relatively modest improvements.

Schelling Xie from Stansberry China said that investors’ sentiments about A-shares have dropped dramatically. Schelling Xie was a senior analyst. Uncertainty about economic growth and regulation was a key theme.

However, some economists believe that the worst of China’s regulatory crackdown is over,It doesn’t necessarily mean that there will be a reversal in the existing rules.

Although the market will rebuild its confidence over time, it’s not appropriate to become too pessimistic now, Xuan Wei (chief strategist at China Asset Management) stated in a note. He said there were opportunities for technological growth and new energy stocks.

One of few industries in which the financial sector is thriving is the financial industry. Beijing has relaxed ownership restrictionsThese changes have been made in recent years. These policy changes allowed BlackRock, Goldman SachsAnd UBSBuy full control of local mutual fund or securities operations.

Brendan Ahern (chief investment officer, KraneShares) stated that one of the main reasons we are bullish on China is because we operate in an area in which China has opened up in a huge, big way. One of the U.S.’s most prominent exchange-traded funds, KraneShares sells it. It tracks Chinese internet stocks. KWEB.

Ahern stated that “in general, I believe there’s a disparity between the Chinese and foreign investors views of China.”

After dropping more than half in 2021, KWEB has seen an increase of 3.8% so far this year. Hong Kong Hang Seng indexThe increase in sales is about 5.5%, and the Shanghai composite is down about 4.7%.

Winnie Wu of Bank of America Securities said, “Overseas Investors generally prefer to purchase China for Growth” over banks and other industries that have many state-owned entities.

She did however note that state-owned companies have been leading recent outperformers. This trend is not likely to continue and can be detrimental for sustained market gains.

“Our view overall is for this year. [the]”The China market isn’t an easy bull market.” she stated. It’s likely that people will be selling their hope rather than relying on facts and results.