Global funds tiptoe into China’s ‘new economy’ firms


  • Global funds are cautiously venturing back into Chinese equities after prices collapsed to 4-1/2-year lows in February, taking advantage of cheaper valuations to buy stocks they believe will benefit from China’s shift to a consumption-led economy.
  • Foreign investors are tentatively buying in sectors linked to the main themes of the 13th Five-Year Plan released earlier this month, including urbanisation, consumption, internet growth, green development and innovation.
  • The MSCI China index has gained 17% since Feb 12 and while foreign investors are still net sellers the scale of net selling has shrunk to US$272 million from March 1 to 25 versus an average of US$2.1 billion over the previous four months, according to EPFR Global data.
  • Most investors are focusing on specific “new economy” industries, which make up only a small proportion of the market, while avoiding those sectors linked to the “old economy”.

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