Foreign investors are playing a more important role in China’s A-share market in recent years, which will improve market functioning and boost the performance of large-cap equities and consumer stocks, China Daily reported Monday.
Holdings of foreign investors in the A-share market accounted for about 2.5 percent of total market capitalization as of June this year, up from 2.1 percent and 1.3 percent by the end of 2017 and 2016, said the report, citing data from Aberdeen Standard Investments, a London-listed global asset manager.
“We expect the proportion to rise in the following years, considering A shares’ inclusion in major global indexes such as the MSCI Emerging Markets Index,” Nicholas Yeo, head of China Equities at Aberdeen, was quoted as saying. The trend will likely help improve corporate governance in mainland-listed companies because foreign investors prefer such companies to make their long-term investments sustainable, Yeo said.
Foreign investors could help solve the twin problems of the Chinese stock market – the lack of long-term investments and the prevalence of short-term speculative trading, the report quoted Zhang Xia, chief strategy analyst at China Merchants Securities, as saying.
Typically, foreign investors adopt long-term investment strategies, and prefer large-cap stocks and consumer stocks, likely to help those stocks register good performance in the future, Zhang said.
Chinese policymakers have been making moves to increase foreign investors’ interest in A shares, including reducing trading suspensions.
Compared with 2015, overall suspensions have declined by 80 percent this year, the report said, citing market data.