A series of positive updates, ranging from a top-level meeting signaling more housing sector support to rising hopes of improving global liquidity conditions, may have set a strong foundation for Chinese equities to register a sustained rally, experts said.
The rebound during the May Day holiday of Chinese shares listed overseas bodes well for the A-share market's reopening on Monday and indicates global investors' growing interest in Chinese companies, particularly advanced manufacturers, they added.
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Chris Liu, a senior portfolio manager at global investment management company Invesco, said he is upbeat about Chinese equities' performance for the rest of the second quarter, as policy measures to support economic recovery continue amid expectations of United States rate cuts that would help bring more global liquidity to Chinese shares.
"China's economic data has shown signs of stabilization, significantly boosting the confidence of both domestic and foreign investors," Liu said.
Following China's better-than-expected first-quarter economic growth, the country's economic recovery continued in April, with the official manufacturing purchasing managers index standing at 50.4, down from 50.8 in March but still in expansionary territory.
At a meeting on Tuesday, the Political Bureau of the Communist Party of China Central Committee called for research on policies and measures to reduce housing inventory and the flexible use of policy tools such as interest rates and the reserve requirement ratio.
Among the investment opportunities offered by Chinese equities, Liu said that Invesco is particularly optimistic about the copper, pharmaceuticals and robotics sectors.
Invesco is not the only foreign institutional investor that is so upbeat. According to market tracker Wind Info, 94.19 billion yuan ($13 billion) of foreign capital flowed into A shares in the past three months via northbound trading in the stock connect program, which links the Shanghai and Shenzhen markets with the market in Hong Kong.
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Contemporary Amperex Technology, China's leading vehicle battery maker, attracted a net foreign purchase of 8.94 billion yuan.
Experts said the data shows that international capital has been benefiting from growing competitiveness of China's green manufacturing industries.
Channel Yeung, a market analyst at financial trading platform FXTM, said the push for Chinese listed companies to increase dividend payouts and share buybacks is poised to attract patient foreign capital into the A-share market.
If implemented effectively, Yeung said, "we can expect robust long-term performance from the A-share market".
