Investors remain confident about China

Investors’ confidence in China remains robust and the case for investing in China continues to be strong, thanks to the efforts of the country’s regulators and exchanges over recent years to liberalize its capital market access, according to a survey from Standard Chartered Bank.

Gathering responses from 131 investors, regulators, custodians and brokers from across Asia, Europe and North America, the survey found 86 percent of respondents are investing in the world’s second largest economy, including all respondents from the US.

Most respondents expect to increase their investment in 2020 while 63 percent consider the Chinese market as the top 3 priority in the world. 

“Since China began opening up its capital markets in 1992, the country’s concerted approach to liberalization has gradually won the confidence of international investors. This year we found investors continued to focus very strongly on China,” said Margaret Harwood-Jones, global head of securities services at Standard Chartered Bank.

While there has been some moderation in investor sentiment, this can be mainly attributed to rising Sino-US trade tensions, which have rattled markets across the world and caused a short-term pick-up in China’s capital outflows, the UK lender noted.

More positively, however, regulatory barriers to foreign investment are falling and index inclusion is gathering pace for both equities and bonds.

One driver of investors’ continued confidence is the efforts of Chinese regulators and exchanges over recent years to liberalize its market access. For example, only around a quarter of respondents are concerned about regulatory uncertainty in 2019, down from 43 percent last year.

Investors seek to gain access to the broadest range of onshore assets, according to the study. Wholly-owned foreign enterprises (WFOEs) will be key to investors’ China strategies, with 45 percent of respondents either having or planning a WFOE.

However, challenges still remain for investors wanting to enter China’s markets. The survey found investors wanting a better market infrastructure to help them manage foreign exchange risks, with 29 percent citing it as their top concern, second only to the US-China trade tensions at 38 percent.

In addition, index inclusion has yet to deliver the expected inflows to onshore assets, with only 11 percent survey respondents indicating that inclusion influenced their decision to invest.

Despite the obstacles, signs are that China is still attracting new investors, products and strategies that will power inflows and spur market reform. And investment to China has never been easier, the study said.