HSBC: Foreign funds have significantly increased their allocation of A-shares, and the big cut is not printed stocks, but Taiwan stocks

As China's economy stabilized and rebounded, foreign investors began to buy A-shares in a big way.

Today, A-shares rose like a rainbow, with northbound funds unilaterally buying 22.449 billion yuan, a new high since the opening of the Cross-border Stock Connect. This week, northbound funds have accumulated a net purchase of nearly 26 billion yuan.

HSBC pointed out in its recently released Asian equity strategy report that after the downturn at the end of last year and the beginning of this year, A-shares have regained the market's favor, and foreign positions are now at a five-month high.

At the same time, Taiwan's stock market saw large net outflows. In addition, the fund's allocation to the Indian market has not changed much, and the overall allocation is still underweight. HSBC also highlighted that the fund's position in the South Korean stock market is close to a five-year high, driven by the Han Special Valuation.

U.S. Treasury yields rose, and there was an overall outflow of funds from the Asian market, but A-shares are still favored by foreign investors

From the perspective of fund holdings, HSBC's mutual fund position data shows:

As of April 24, foreign funds have increased their allocations to Chinese mainland equities, and the sell-off has decreased significantly. This is at the expense of Taiwan stocks, which have seen a significant decline in their positions.

In addition, the fund moderately reduced its exposure to India, with the overall allocation at the lowest level in Asia.

According to a previous report by Shanghai Securities News, a number of economic data such as the official manufacturing PMI in March continued to exceed expectations, causing foreign institutions to raise their forecasts for China's economic growth in the first quarter and even the whole year.

Goldman Sachs Research's macroeconomic team said that China's economic data from January to February generally exceeded expectations, and the manufacturing PMI data in March was higher than the market consensus, while recent high-frequency data showed economic resilience, so the forecast for China's real GDP growth was raised.

According to HSBC data, A-shares have received net inflows for two consecutive months in February and March, but they have been net sellers so far in April, but their positions are still at a five-month high.

Taiwan stocks saw the largest net outflow in 22 months South Korea's stock market has seen inflows for six consecutive months

Since the beginning of the year, the strong U.S. economy has pushed the market to slash Fed rate cut expectations. Asian markets saw outflows due to rising US Treasury yields and a stronger US dollar.

In April, foreign institutional investors (FIIs) sold $11 billion worth of Asian equities. Among them, Taiwan stocks saw an outflow of $6.8 billion, the largest monthly outflow since June 2022.

Driven by the "Han Special Valuation", the South Korean stock market has seen capital inflows for six consecutive months, and foreign capital has maintained a net buying momentum. However, the momentum of inflows has slowed this month.

In other markets, ASEAN was generally seeing outflows, driven by the sell-off in Indonesian equities. Japanese stocks received foreign capital inflows of US$11.7 billion in April, marking the fourth consecutive month of inflows.

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