Global investors plan to increase China allocations: survey

The hunt for yield and market opening initiatives is seeing global investors pile into China, according to a survey by HSBC Qianhai Securities Limited.

Investors are reconfiguring their global portfolios to give China a much greater role as the world’s fastest growing economy leads the world out of the COVID crisis. Sixty-two percent of top international institutional investors and large corporates plan to increase their China portfolio allocations by an average of 24.5 percent in the next 12 months, the study said.

Attractive yield opportunities against a global backdrop of extremely low interest rates is the key driver of increased participation by offshore investors in the Chinese market, the survey showed.

This is facilitated by greater ease of access through inclusion of Chinese stocks and bonds in major global indices, and market access initiatives such as Stock and Bond Connect schemes, and the China Interbank Bond Market Direct and RMB Qualified Foreign Institutional Investor programs. 

Trading volumes so far this year show significantly increased international investor participation in both debt and equity markets in the Chinese mainland. In the first nine months of 2020, northbound Bond Connect volumes were up 122 percent year on year, while northbound Shenzhen and Shanghai Stock Connect volumes were up 157 percent and 77 percent, respectively.

The survey of 935 institutional investors and large corporates based in Asia Pacific, Europe and North America also showed that the top issues affecting further participation are trust in local rating systems and controls on outward remittance of funds.

Environmental, social and corporate governance was identified as a critical factor when screening investments, especially among European investors, who rate it as a more significant factor than their peers in North America and Asia Pacific.