Global banks see upside in Chinese stock rally as international capital ‘rotates’ in

Foreign investors have been increasing their holdings of Chinese stocks in an orderly manner, and this rotation of funds from regional markets suggested that any re-rating of Chinese equities could lead to significant capital inflows, they said.

“We have observed that some Asia-Pacific regional investors have already taken action,” said Kevin Liu, chief offshore China and overseas portfolio strategic analyst at CICC Research. “Their positions are equal weight or even overweight.”

“A short-term fluctuation doesn’t equal a pullback, and markets might go up if there are new catalysts.”

The Hang Seng Index slid slightly to close at 23,782.14 after slumping as much as 2.3 per cent, adding to a 1.9 per cent loss on Monday and a 0.6 per cent setback on Friday. The Hang Seng Tech Index rose 1.4 per cent. The CSI 300 Index edged up 0.3 per cent, and the Shanghai Composite Index added 0.4 per cent.