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financial news agency, october 3 (editor xiaoxiang)there are increasing signs that the strong rebound in china's stock market is triggering a directional change in global investment portfolios, and many overseas investors are racking their brains to try to catch this wave.

according to market observers, the wave of funds that earlier left the chinese stock market and invested in japanese and southeast asian stocks is trying to reverse the direction after the introduction of the chinese government’s latest stimulus policies.this change has actually begun quietly before the holiday: the stock markets of south korea, indonesia, malaysia and thailand all experienced net outflows last week; statistics from bnp paribas show that more than 20 billion us dollars have been withdrawn in the first three weeks of september. japanese stock market.

this latest phenomenon of capital flows may mean that the pursuit of chinese assets is becoming the latest trend in the asia-pacific and even global markets. earlier this year, the japanese stock market was on the rise after breaking its high in more than three decades, the indian stock market also reached new highs due to accelerated economic growth, and the southeast asian market was also boosted after the federal reserve cut interest rates. and now,things are changing, and the new global market seems to be walking with the "dragon"...

eric yee, senior portfolio manager at atlantis investment management in singapore, said,"we are cutting long positions across asia to fund purchases of chinese stocks. everyone is doing it. this is a good policy-driven recovery. you don't want to miss an opportunity like this."

the msci china index has risen more than 30% from recent lows as the chinese government announced a series of measures to stimulate economic growth last week. the trading volume of a-shares and hong kong stocks both hit record highs on monday. some overseas investors lamented on social media, citing the ftse china a50 index futures as an example, that the chinese stock market erased 938 days of decline in just 7 days.

hedge funds betting on china 'get big gains'

according to people familiar with the matter, the crazy rise in china's stock market over the past week or so has brought returns of more than 25% to some hedge funds betting on chinese assets.

it is reported that the triata capital china fund soared 44% last month, the bluecreek china fund's return rate was as high as 31%, and the yunqi capital china fund jumped 26%. many other funds have also recovered from losses earlier this year. data from eurekahedge pte shows that with the strong rebound of a-shares, hedge funds focusing on the chinese market finally got the long-awaited opportunity.

last week's first rally benefited hedge funds whose bullish positions on chinese stocks far outweighed their bearish positions. many people are optimistic that careful selection of individual stocks can even lead to market-beating returns. after billionaire investor david tepper threatened that he was buying all assets related to china, many hedge funds poured into chinese stocks at a record speed.

data show that goldman sachs’ hedge fund clients’ net purchases of chinese stocks last week reached the highest level since the bank’s prime broker business statistics were collected in 2016.

it is reported that mount lucas management, a hedge fund from the united states, has currently established a bullish position in chinese etfs, while singapore's gao capital and south korea's timefolio asset management are buying chinese blue chip stocks. according to the latest documents from the hong kong stock exchange, jpmorgan chase increased its holdings of 39,861,682 h shares of ping an of china on september 26, at a cost of approximately hk$1.771 billion, and its shareholding ratio increased to 8.28%.

"we believe some foreign investors are reducing their excess positions in japanese stocks and reallocating back to chinese stocks," bnp paribas strategist jason lui and others wrote in a report on wednesday.

to be clear, this shift is still in its infancy.mohit mirpuri, a fund manager at sgmc capital pte. in singapore, said, "while it is still early, the 'thesis of shifting from japanese or indian markets to china' makes sense. the current momentum is difficult to ignore."

despite more than a week of sharp gains, the current valuation of chinese stocks is still not very high - even with the recent rebound, the forward price-to-earnings ratio of the msci china index is still only about 10.8 times, lower than the 11.7 times in the past five years. average.

joseph zhang xiaogang, founder of bluecreek china fund, said that the valuation of the chinese market is still very cheap. previously, global investors had too deep a negative bias against china and its economy, and it will take some time for them to change their bias. he predicted that the chinese government still has many measures to support the economy in its toolbox.

according to epfr data as of the end of august, the total allocation ratio of global mutual funds in chinese stocks is about 5%, which is the lowest level in the past decade. this highlights that there is still a lot of room for many funds to increase their holdings of chinese stocks.

datatrek research, a research organization, stated,if historical experience serves as a guide, china’s stock market rebound may still have a long way to go.the agency compared the relative performance of the ishares china large cap etf (fxi) and the spdr s&p 500 etf (spy) over a 100-day rolling time span. it found that during periods of "positive shifts in chinese policy," such as 2009, 2015 and 2023, chinese stocks typically outperformed u.s. stocks by 30 percentage points or more. now, the relative excess return is only 13 percentage points.

datatrek co-founder nicholas colas wrote in a note to customers,from this perspective, given the performance of chinese stocks after previous policy shifts, there is definitely more room for chinese stocks to rise relative to u.s. large-cap stocks.

now that you’ve seen the future, why not buy!

it is worth mentioning that after the a-share surge last week, although the chinese stock market is currently in the national day golden week holiday, the bullish calls from overseas institutions have not stopped.

morgan stanley said on wednesday local time that if the chinese government announces more spending measures in the coming weeks, the chinese stock market may rise by a further 10% to 15%.

“expectations of further fiscal expansion are back on the table, causing investors to view china through a reflation lens for the first time in a long time. the last time investors viewed china through this lens was, in fact, after the beginning of last year, the valuation given by global investors at that time was about 12 times the expected price-to-earnings ratio of the msci china index," laura wang, chief china equity strategist at morgan stanley, said in an interview.

the 15% upside mentioned above is obviously not the most optimistic forecast in the current market. thomas gatley, an analyst at gavekal dragonomics in china, threatened,if all goes according to plan, china's stock market surge over the past week could be just the beginning of a "super rally" that could reach as much as 100%.

he pointed out that whether this rebound can be sustained is likely to depend on whether china's policymakers can launch the combination of monetary and fiscal stimulus that international investors are looking forward to. assuming that monetary, fiscal and direct market support policies can be implemented, it is basically guaranteed that the stock market will continue to rise.

gatley shared the results of his analysis in a report on monday, which is based on the performance of china's stock market over the past 20 years. according to his statistics, since the launch of the csi 300 index in 2005, there have been a total of five "super rebounds" in the chinese stock market. of these five remarkable rebounds, only two (beginning in 2006 and 2017) were driven by strong own economic growth and rising corporate profits. the other three were driven by stimulus measures.

gatley said the stimulus-fueled rally ranges from trough to peak at about 50% to 100%. therefore, if there is another such rally, there should be a lot of room for growth. in addition, although both a-shares and h-shares have seen strong gains so far. but in past super rallies, a shares tended to perform better than h shares.

nicolas amstutz, a partner at lotus peak capital in singapore, also said that we believe china’s future environment is conducive to an investment strategy focused on alpha.

in the hong kong market, which was the first to resume trading this week, many hong kong stock brokers have ushered in one of the busiest periods of their careers. xu yibin, ceo of yaocai securities, a large local brokerage in hong kong, praised this round of hong kong stock rises as " a once-in-a-hundred-year event.

he said,the current market reminds him of 2015, when a rush of buying triggered a bull market in hong kong and china. currently, the company has also seen a surge in account openings. many of the company's customer support staff have canceled scheduled vacations and are on call 24 hours a day to handle an unprecedented surge in customer inquiries.

tiger brokers, a trading platform popular with hong kong retail investors, also said its number of account openings surged 73% last week.

of course, with investor enthusiasm rising, some areas of the market showed signs of a correction after overheating during the session on thursday - the hang seng technology index fell as much as more than 7% during the day, and the hang seng index also fell by as much as 7%. it once exceeded 4%, with some recent strong stock sectors leading the decline. however, in the afternoon, the decline quickly narrowed again, which undoubtedly reflects the resilience of buying orders in the current market.

zhao chen, chief global strategist at investment research firm alpine macro, said that although there is no guarantee that improved profits and cheap valuations will definitely lead to outstanding performance in the chinese stock market,in the long run, buying chinese stocks may already be a value investment!