Chinese A-share assets are likely to continue outperforming most
overseas equities in 2021, thanks to the country's robust economic
recovery and the inflow of capital from foreign investors and domestic
residents, experts said on Thursday.
The CSI 300 index, a benchmark of the A-share market, has climbed
6.79 percent since the beginning of 2021 to Thursday's close at 5564.97
points, trading around its highest level in 13 years and outrunning the
S&P 500's 2.55-percent rise this year as of Wednesday, according to
market tracker Wind Info.
"The A-share market is likely to continue leading global equities in
2021," said Channel Yeung, China market analyst at FXTM, a United
Kingdom-based global trading platform.
While it will still take some time for many major economies to end
large-scale lockdowns and achieve economic recovery, China is already on
the positive growth track and is expected to further expand its
momentum this year amid policy support, he said.
On Monday, China reported 2.3 percent economic growth in 2020,
becoming the world's only major economy expected to have avoided
contraction last year.
As consumption and corporate investment are normalized in China,
A-share firms are expected to see their earnings rapidly recover,
enhancing their investment allure and attracting more foreign investors,
From Jan 1 to Thursday, the A-share market saw a net inflow totaling
48.7 billion yuan ($7.5 billion) via stock connect programs with Hong
Kong, with Jan 8 seeing 20.6 billion yuan worth of net inflows, the
second-highest in history, according to Wind Info.
The bullish sentiment also prevailed among Chinese investors. A
mutual fund issued by E Fund Management Co Ltd broke the record for the
initial subscription amount in China's mutual fund industry on Monday,
attracting more than 230 billion yuan in subscriptions.
The wave of Chinese families investing more in stocks and funds would
be a key aspect of this year's market uptrend, thanks to the shrinking
supply of shadow banking products curbs on housing purchases, as well as
strengthened investor protection and quality of listed firms in the
capital market, said Wendy Liu, head of China strategy at UBS Global
Meanwhile, about 200 billion yuan worth of foreign capital is
expected to flow into the A-share market this year, helping the CSI 300
climb to 5950 points in an optimistic scenario, Liu said.
Lynda Zhou, chief investment officer for equities in China at global
asset manager Fidelity International, said the A-share market may outrun
global equities this year amid continued foreign inflows, with cyclical
shares that are the most sensitive to economic recovery and consumer
discretionary sectors likely to be among the big winners.
Cyclical sectors like oil, chemicals, machinery and metals led the
market higher on Thursday, sending the CSI 300 up 1.62 percent,
according to Wind Info.
However, volatility will intensify in the A-share market this year,
particularly as shares traded at high valuations face substantial
downward pressure if their earnings fail to meet market expectations,
After ending last year on a strong note with the CSI 300 rising over
27 percent, some A-shares, especially industry leaders in the sectors
such as liquor, medical care and new energy vehicles are now traded at
relatively high valuations.
The expensive industry leaders may face short-term corrections as
investors turn to cheaper companies, but should again attract investors
when their valuation levels become more reasonable, given institutional
investors' preferences for shares with high earnings growth and steady
prospects, said Yeung from FXTM.