Since the beginning of 2026, global capital has shown sustained and heightened enthusiasm for allocating to Chinese assets. From concentrated share acquisitions in the Hong Kong market to the continuous capital inflow into overseas thematic ETFs, and from optimistic institutional reports to the accelerated pace of actual fund inflows, foreign capital is demonstrating firm confidence in the resilience of China's economy and the value of its assets through a dual approach of "talking up and acting upon" their bullish stance.
Experts interviewed widely agree that the increased allocation by foreign investors to Chinese assets is a rational choice driven by the resonance of multiple favorable factors, with core reasons concentrated across three dimensions: a stabilizing and recovering fundamental economic foundation solidifying the base, prominent valuation advantages enhancing attractiveness, and continuously released opening-up dividends improving accessibility. Simultaneously, as China's industrial upgrade accelerates, enterprises possessing sustained R&D capabilities and globalized layouts are set to become the core of long-term foreign investment allocation. A structural market trend led by technology stocks is expected to persist throughout the year, with Chinese assets becoming a crucial component of global portfolios due to their clear growth logic.
Foreign favoritism towards Chinese assets is first and foremost reflected in tangible share-buying actions. Since the start of the year, international capital represented by firms like JPMorgan Chase and BlackRock has frequently engaged in a "shopping spree" mode, increasing their holdings of Chinese assets.
Data disclosed by the Hong Kong Exchanges and Clearing Limited shows that since the beginning of the year, JPMorgan has cumulatively spent over HKD 10 billion increasing its stakes in several Hong Kong-listed companies, spanning sectors including new energy, biopharmaceuticals, communication services, and real estate. Specifically, on January 2nd, JPMorgan invested HKD 408 million to increase its holding in Contemporary Amperex Technology Co. Limited by 793,500 shares, HKD 249 million to increase its holding in Innovent Biologics by 3.173 million shares, HKD 63.47 million to increase its holding in Ganfeng Lithium by 1.1839 million shares, and HKD 11.86 million to increase its holding in China Vanke by 3.5452 million shares. On January 5th, JPMorgan maintained its buying pace, investing HKD 246 million to increase its stake in Alibaba Health by 46.6683 million shares and HKD 106 million to increase its stake in China Tower by 9.1349 million shares.
Notably, overseas thematic ETFs have become a significant channel for capital allocation during this phase of foreign investment increase, continuously experiencing net inflows. Technology-focused ETFs have performed particularly well. For instance, the Invesco China Technology ETF had assets under management of $3 billion as of January 8th, a 6.53% increase from $2.818 billion at the end of last year.
Qian Jing, CEO of Morgan Stanley Securities (China) Co., Ltd., stated that foreign capital is actively participating in investments in China's advanced industries, with competitive sectors like biopharmaceuticals and new energy holding strong appeal for foreign investors.
Furthermore, the breadth of capital inflows has extended to the bond market, creating a new area for foreign allocation. For example, in the primary market, Panda bond issuance by foreign entities has taken the lead. On January 7th, Germany's Henkel Group issued Panda bonds worth 1.5 billion yuan, marking the first such issuance by a foreign company in 2026. On January 8th, Barclays Bank commenced a Panda bond issuance of 4 billion yuan, demonstrating foreign recognition of renminbi-denominated bond assets.
Bai Xue, Senior Associate Director of the Research and Development Department at Golden Credit Rating International, indicated that the optimization of mechanisms like Bond Connect and Swap Connect, coupled with the inclusion of China's bond market in more international indices, is significantly enhancing the appeal of Panda bonds to global long-term investors. Simultaneously, growing allocation demand from sovereign wealth funds, pension funds, and asset management companies will inject stronger momentum for foreign institutions, international organizations, and multinational corporations to enter this market.
The buying actions by foreign investors are underpinned by overwhelmingly positive outlooks and active forecasts for Chinese assets from leading institutions. Recently, multiple firms including Goldman Sachs, JPMorgan, Morgan Stanley, and UBS have intensively released reports, raising economic growth forecasts and index targets, while maintaining "overweight" ratings on Chinese assets.
For example, in its recent report "China 2026 Outlook: Exploring New Drivers," Goldman Sachs projected China's real GDP to grow by 4.8% in 2026, higher than the market consensus of 4.5%. It also forecasted the MSCI China Index and the CSI 300 Index to rise by 20% and 12% within the year, respectively. By the end of 2027, the Chinese stock market is expected to achieve a 38% increase.
Delving deeper, the ongoing recovery in corporate earnings serves as a core supporting logic for institutions' bullish stance on Chinese assets. There is a general consensus that the driving force behind the Chinese stock market is shifting from the valuation recovery seen in 2025 to earnings growth in 2026. Goldman Sachs expects Chinese corporate earnings to grow by 14% and 12% year-on-year in 2026 and 2027, respectively. UBS predicts that the profit growth rate for all A-share companies will increase from 6% in 2025 to 8% in 2026, with factors such as rising nominal GDP growth and the advancement of policies aimed at curbing internal competition driving a recovery in corporate profit margins.
The absolute advantage in valuation further strengthens the global appeal of Chinese assets. Compared to major global markets, the Hang Seng Index currently trades at a price-to-earnings ratio of approximately 8.2 times, below its historical average and significantly lower than the S&P 500's 21.3 times and the Nasdaq Composite's 28.7 times. Goldman Sachs' strategy team believes that the valuation discount on Chinese assets already fully reflects market concerns about various risks. As fundamentals stabilize and policy uncertainty decreases, there is substantial room for valuation repair. They anticipate Chinese asset valuations will converge towards global averages in 2026, leading to significant valuation uplift gains.
The dual support of industrial upgrading and policy dividends further bolsters institutional confidence in the long-term growth logic of Chinese assets. The "Catalogue of Industries Encouraged for Foreign Investment (2025 Edition)," effective from February 1, 2026, expands the scope of encouraged sectors to a total of 1,679 entries, guiding foreign investment towards advanced manufacturing, modern services, high and new technology, as well as regions like Central and Western China, Northeast China, and Hainan. Investments in related areas can enjoy supporting preferential policies on tariffs, land use, and taxes. In terms of capital markets, efforts continue to optimize QFII access services and promote the opening of futures and options to more investors. Concurrently, improvements to the filing mechanism for overseas listings, coupled with optimizations to Hong Kong's listing rules such as Chapters 18A and 18C, provide greater convenience for foreign participation in A-share and Hong Kong stock investments.
Wang Yan, Morgan Stanley's Chief China Stock Strategist, stated in a recent report that entering 2026, more foreign capital will return to the Chinese market. She indicated that it is "only a matter of time" before active funds increase their allocation to Chinese assets.
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