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Foreign Capital’s Flow into China’s A-Share Market: Current Performance, Influence and Policy Options (No.105, 2019)


By Wang Yang, Institute of Finance, DRC

Research Report, No.105, 2019 (Total 5605) 2019-7-3

Abstract: In recent years, foreign capital’s flow into China’s A-share market has increased as China moves faster to open up its financial market and promote international standards in domestic capital market. As many financial institutions predict, foreign capital’s flow into China’s stock market will see a remarkable rise in 2019. Shanghai and Shenzhen Stock Connects have become major channels for foreign investment to flow into China’s A-share market. In terms of investment styles, foreign shareholdings focus on blue chips with high rate of return on common stockholders’ equity and liquidity, especially on leading stocks with strong upward revaluation. Compared with Chinese investors, the tendency of buying on the upswing and selling on the downswing is less prominent among foreign money men. Although direct impacts of foreign investment on China’s stock market are still moderate, the ability of the funds on market expectations’ performance and core asset pricing abilities has been steadily enhanced, which will promote the establishment of value-oriented investment concepts in the market and strengthen the connection between domestic and foreign stock markets. It is advisable for China to push ahead with the opening up of its stock market, further improve supporting systems and mechanisms for more open-oriented market operation and take effective countermeasures against risks caused by foreign capital’s inflow.

Key words: stock market, foreign capital, inflow