At the beginning of 2022, foreign investors are looking into China as a haven from the inflation, growth and pandemic problems that plague most other markets.
Global fund managers are pumping money into mainland equities and bonds despite seeing returns eroded by Beijing's regulatory and policy purge last year, while betting on China's stability pledges, monetary and fiscal easing and subdued inflation could shield them against volatility in other markets.
That's in stark contrast to the conditions elsewhere in the world. Major central banks are preparing to withdraw the excess monetary tightening measures over the past couple of years, and the Federal Reserve is hastening monetary tightening to tame runaway inflation, which could cause a deterioration of stock values and earnings.
According to Matthews Asia head of portfolio strategy, China is the one favorite country in 2022 among the roughly 30 investible emerging equity markets.
Dali believes that Chinese valuations are some of the least risky and most attractive of all major markets.
He cited factors including less regulatory headwinds, government readiness to stimulate the economy, and a political mandate to maintain stability in a year widely expected to confirm President Xi Jinping's unprecedented third term.
Fidelity International sees China stocks as attractive from a global perspective.
China's policy shift is very clear. The data shows that the economy has stabilized, according to Fidelity's Shanghai-based fund manager Zhou Wenqun.
In the year 2021, a record US $67 billion was invested in onshore equities, with a record US $67 billion invested in the Connect channel. The mainland blue-chip index lost 5.2 per cent, compared to a near 27 per cent rise in the US S&P 500 and double-digit gains in most European indices.
Bond investors are drawn toward China, despite a widening Sino-US monetary policy divergence.
In a rate hike cycle, bond markets usually perform badly, but in China, we see that monetary policy easing cycle is only at the beginning, according to Paula Chan, senior portfolio manager at Manulife Investment Management.
China's inflation concern is not as alarming as in other countries and its bonds are a good hedge, she said.
Despite a slew of cuts in key interest rates to support the economy, the Chinese yuan has climbed to its highest level against the dollar in nearly four years this week.
Foreign money inflows into emerging markets outside China have come to an abrupt standstill, according to the Institute of International Finance IIF.
In December, emerging markets EM outside China suffered an outflow of US $9.6 billion, compared with an inflow of US $10.1 billion for China. Chinese equities saw an inflow of US $12.5 billion, contributing to most of the EM inflows.
In its latest capital flows tracker report, IIF said that the outlook for non-China EM is worsened due to the Omicron variant and expectations of a stronger dollar and higher US interest rates. Markets think China is rebounding more quickly than other EMs. According to Morgan Stanley, top stocks included China Merchants Bank, NARI Technology, and Ping An Insurance Group, and foreign buying was concentrated in the banking, materials and capital goods sectors at the beginning of the year.
UBS Securities said foreign investors and domestic mutual funds had allocated hot themes, such as new energy and manufacturing.