Investors have long relied heavily on New York and Hong Kong-listed companies like Alibaba Group Holding Ltd (NYSE:BABA) and Tencent Holdings Ltd (OTC:TCEHY) to gain exposure to China, partly due to regulatory certainty, Financial Times reports. However, the global holdings of Chinese stocks and bonds have jumped by about $120 billion in 2021 as foreign investors chase diversification and returns despite recent volatility and regulatory crackdowns.
Stats: The international investors held Rmb7.5 trillion ($1.1 trillion) of equity and fixed income securities priced in renminbi as of September end, up about Rmb760 billion from 2020. China’s offshore listings have had a tumultuous year, with a succession of regulatory crackdowns knocking investor confidence in sectors ranging from technology to education.
Meanwhile, a liquidity crisis at property developer Evergrande Property (OTC:EVGPF) has prompted a round of heavy selling for internationally traded, high-yield dollar bonds from Chinese issuers.
As per a Hong Kong fund manager, the U.S.-listed stocks are not attracting investors due to policy overhang. Investors seek interesting stories in so-called A-shares listed in Shanghai and Shenzhen.
The FTSE Russell’s decision in 2020 to add Chinese government debt to its influential World Government Bond index, paving the way for over $140 billion in primarily passive inflows, supported buying in China’s onshore bond market, a China economist said. Despite recent economic disruptions, the Chinese currency’s resilience “boosted people’s confidence in buying renminbi assets.”
Foreign trading of onshore stocks and bonds has increased as western banks, including Goldman Sachs Group Inc (NYSE:GS) and JPMorgan Chase & Co (NYSE:JPM), have pushed to acquire licenses and wholly-owned subsidiaries in mainland China. HSBC Holdings PLC (NYSE: HSBC) and Fidelity recently turned positive on Chinese assets for the first time since the regulatory crackdown began in July.
Price Action: BABA shares traded lower by 0.54% at $161.29 in the premarket session on the last check Tuesday.