With improving market risk appetite, overseas funds are showing growing interest in Chinese equity assets.
During the previous week (April 13–17), several Chinese equity ETFs listed overseas, including the iShares China Large-Cap ETF (FXI) and the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR), recorded net capital inflows. According to EPFR data, from April 8 to 15, passive foreign capital exhibited an accelerating trend of flowing into A-share and Hong Kong stock markets.
In the long term, the increasing allocation of global capital to Chinese assets has become an established trend. Morgan Stanley's Chief China Economist Xing Ziqiang recently stated that amid the current global economic landscape, international investors are gradually reducing their reliance on single-dollar assets, and Chinese assets are expected to continue attracting inflows during this reallocation process.
Passive foreign capital continues to flow in. Last week, activity in the A-share market further rebounded, with all four major indices posting gains; the Hong Kong stock market also saw a rebound. During this market uptick, some overseas capital entered the Chinese market via ETFs.
Data from Futu Securities shows that from April 13 to 17, the iShares China Large-Cap ETF (FXI) attracted approximately $226 million in net inflows, following a net outflow of over $31 million the previous week. Throughout March, the ETF also experienced net outflows. As of April 17, the fund's size stood at about $6.232 billion, an increase of roughly 5.3% compared to the end of March.
The iShares China Large-Cap ETF tracks the FTSE China 50 Index, which primarily covers 50 large Chinese companies listed on the Hong Kong Exchange.
During the same week, the Invesco China Technology ETF (CQQQ) and the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) received net inflows exceeding $18.62 million and $19.48 million, respectively. As of April 17, the sizes of these two ETFs were $2.698 billion and $1.648 billion, both showing significant growth compared to the end of March this year.
Additionally, statistics from global fund flow monitor EPFR indicate that overseas passive capital has recently accelerated its inflow into the Chinese market.
Data from China International Capital Corporation (CICC) shows that, according to EPFR, from April 8 to 15, passive foreign capital inflows into Hong Kong stocks amounted to approximately $1.1 billion (compared to $880 million the previous week), while inflows into A-shares were about $310 million (up from $20 million the prior week). Active foreign capital saw a slight inflow of $10 million into Hong Kong stocks but an outflow of $20 million from A-shares.
In fact, over the long term, the trend of global capital increasing its allocation to Chinese assets is clear. Since late February this year, global risk assets have faced widespread pressure due to Middle East tensions, with even traditional safe-haven assets exhibiting high volatility.
Against this backdrop, the logic of global capital allocation has shifted, leading to a repricing of Chinese assets. Standard Chartered's Managing Director and Chief Economist for Greater China and North Asia, Ding Shuang, recently noted that the renewed attention on Chinese assets stems partly from external environmental changes. Rising geopolitical risks and global economic uncertainties have prompted some investors to seek safe havens, with RMB-denominated assets gradually entering their view. At the same time, China's sustained investments in technology and industrial sectors are beginning to yield results, particularly in areas like artificial intelligence and new energy, creating new return expectations.
Bloomberg's Chief Economist for Asia-Pacific, Shu Chang, believes that as China's market scale and trading mechanisms continue to improve, international investors are no longer treating China merely as a regional allocation supplement but are incorporating it into the core asset framework of their global portfolios.
Xing Ziqiang judged that the ultimate determinant for large-scale capital inflows into the Chinese market remains fundamentals. He pointed out that foreign confidence in the Chinese market has significantly improved compared to two years ago, but profitability and demand recovery still require time to validate.
QFIIs are increasing their positions in the AI industry chain. In terms of key investment directions, foreign institutions currently maintain a high level of focus on the AI industry chain within the A-share market.
Based on the latest disclosed first-quarter reports of A-share listed companies, Wind data shows that, as of noon on April 20, QFIIs have appeared in the top ten circulating shareholder lists of over 40 listed companies.
Among these, several companies received new significant positions from QFIIs in the first quarter, covering industries such as optical communication, AI power, semiconductors, and energy storage.
For example, IoT innovator BOE Technology Group (BOE A) saw a new significant position of 303 million shares from the Abu Dhabi Investment Authority, making it the 8th largest circulating shareholder of BOE A.
Leading optical module manufacturer Zhongji Innolight received a new significant position from Morgan Stanley. As of the end of the first quarter, Morgan Stanley held approximately 6.495 million shares of Zhongji Innolight, making it the 7th largest circulating shareholder.
Kangqiang Electronics, which specializes in the development, production, and sales of basic semiconductor packaging materials, was newly significantly held by UBS Group. By the end of the first quarter, UBS Group held 3.253 million shares of Kangqiang Electronics, ranking as its 8th largest circulating shareholder.
Chuanrun Equipment, focused on high-end energy equipment and industrial services, was newly significantly held by UBS Group and J.P. Morgan Securities, and also received a slight increase in holdings from Morgan Stanley.
Simultaneously, individual stocks in sectors like chemicals and pharmaceuticals also gained favor from foreign institutions.
For instance, Youcai Resources received new significant positions from both Goldman Sachs Group and J.P. Morgan Securities, while Goldman Sachs International newly significantly held Ruifeng High-Tech Material.
Barclays Bank, J.P. Morgan Securities, and Goldman Sachs Group simultaneously took new significant positions in Wohua Pharmaceutical.
It is worth noting that among the mentioned stocks, as of April 17, Ruifeng High-Tech Material, Kangqiang Electronics, and Zhongji Innolight have seen substantial gains since the beginning of the year, reaching 64.7%, 42.4%, and 39.5%, respectively.
Zhongji Innolight's performance has been particularly strong since April, with its price rising 49.5% from April 1 to April 17.
Looking ahead, the allocation strategies of foreign institutions are likely to revolve around the financial results of listed companies. Morgan Stanley Fund pointed out that the current period is still within the earnings season for annual and quarterly reports. If investor risk appetite does not fluctuate significantly, the focus is expected to remain on sectors with positive performance and clear growth trajectories, while areas with solid quarterly reports but modest expectations may also attract attention.
The former category includes computing power, new energy and power equipment, non-ferrous metals, certain high-end equipment, and chemical products; the latter includes non-bank financial sectors, among others.
Furthermore, some institutions are optimistic about the future performance of the technology sector in the Hong Kong market. Jin Huang, ETF and Innovative Investment Department Fund Manager at Invesco Great Wall, analyzed that, on one hand, the Hong Kong market is transitioning from a存量 market to an增量 market. Sustained southbound capital inflows and foreign sovereign funds optimistic about China's technological growth are providing strong support to the Hong Kong market, potentially aiding a market upturn by 2026.
On the other hand, expectations for sub-sectors within Hong Kong's tech industry are positive. For example, leading Hong Kong-listed internet companies are actively embracing artificial intelligence, with high capital expenditures, and enterprise-level SaaS and domestic large language models are expected to enter a period of rapid commercialization. Additionally, the Hong Kong market is building a broader technology ecosystem. Since 2025, Hong Kong IPOs have been primarily concentrated in software services, pharmaceuticals and biotech, semiconductors, and hardware equipment, significantly enhancing the breadth and growth attributes of the tech sector.
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