Foreign investors are buying up more Chinese stocks than ever before

In January alone, foreigners have snapped up more shares than they did for the whole of 2022, as a result of Bloomberg's return to China's stock market.

The trading links with Hong Kong have added 139.5 billion yuan $20.6 billion worth of stocks listed in Shanghai and Shenzhen, as well as a week-long holiday trading break. According to Bloomberg-compiled data from 2017-2017, that is more than 50% above the previous monthly record.

The fervor has helped drive the CSI 300 Index, a benchmark for mainland stocks, to the brink of a bull market as traders returned from the Lunar New Year holiday this week. Analysts believe foreign buying will drive an outperformance in mainland shares in the coming months, a catch-up to the massive rally seen in overseas Chinese stocks since the start of November.

The solid holiday spending data will provide investors with a shot in the arm throughout the first quarter and boost investor confidence towards a recovery, according to a note by Kaiyuan Securities analyst Zhang Chi.

The buying streak continued into Tuesday, even as the CSI 300 fell 0.8% as of mid-day trading break. The benchmark has risen 19% over the past three months as sentiment improved following Beijing's Covid policy pivot and moves to support growth. The Hang Seng China Enterprises Index, which tracks Chinese firms traded in Hong Kong, is a world-beating feat by itself, but the gains have still trailed the 50% surge in the Hang Seng China Enterprises Index.

The months-long rally has resulted in some investors booking in gains, as illustrated Monday and Tuesday when the CSI 300 pulled back from the brink of a bull market.

There isn't a doubt that Chinese stocks will shine this year. There have been a lot of upgrades for the nation's economy, with Goldman Sachs Group Inc. seeing a 5.5% expansion, even as most developed economies struggle with the fear of a recession.

There is still room for further purchases. Hedge fund investors have boosted holdings of Chinese stocks for three consecutive months but positioning hasn't caught up with the improvement, according to Goldman strategists on January 29. The research done by Morgan Stanley shows that US funds are underweight Chinese stocks.

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Earnings growth will likely follow as the economy recovers and add impetus to the stock market.

The earnings-per-share forecasts of China have not included any upside in revisions, according to Jefferies Financial Group Inc. strategists, including Sean Darby, in a Jan. 30 note. There will be a slew of upgrades that will force investors to chase the market. Streamers are the hottest thing on Twitch, and none of Spanish speakers speak Spanish-speaking Streamers are the hottest thing.