Investors have reportedly funneled hundreds of millions into China’s stock ETFs, raising hopes the inflows could ignite the next equity rally.
ETFs trading in Shanghai and Shenzhen witnessed inflows to the tune of 8.7 billion yuan or $1.2 billion last week, reports Bloomberg.
The sudden surge of ETF investments breaks a nine-week streak of outflows totaling 157.7 billion yuan or $22.12 billion.
The news comes as banking titan Goldman Sachs recently boosted its 12-month price target for the CSI 300 Index, which tracks the top 300 stocks trading on the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). Goldman is now targeting 4,900 from 4,500 for the CSI 300, citing favorable valuation metrics, significant trend-level profit growth and solid market positioning.
Say Goldman strategists in a note,
“The uptrend has legs notwithstanding near-term profit-taking pressures. Liquidity factors and valuation expansion, as opposed to cyclical macro fundamentals, have been the main propeller of equity gains globally, China included.”
Last month, reports emerged that trillions of dollars in dry powder could flood China’s stock markets. Chinese households or mom-and-pop investors are sitting on roughly $23 trillion in deposits, a sum that analysts believe could serve as the fuel for a powerful rally in domestic equities.
JPMorgan Chase projects that as much as $350 billion could flow into Chinese equities between now and the end of 2026, potentially driving a surge of more than 20% in stock prices.
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