While the S&P 500 posted its worst performance for the first half of the year since the 1970s, and other global markets have struggled as central banks raise interest rates, there’s a bull market underway in China.
Easing virus restrictions and a looser policy stance have helped Chinese equities defy the recent sell-off of global stocks. Chinese authorities also recently cut quarantine times for international travelers in half, and policymakers signaled that regulatory crackdowns on tech giants could ease. The CSI 300 has rallied about 19% from an April low after lockdowns were lifted in major Chinese cities. That performance is among the best in global markers.
U.S.-listed Chinese stocks are also gaining momentum. The Nasdaq Golden Dragon China Index (HXC) posted its first quarterly gain in more than a year, and rose over 15% in June. Earlier this week, investors added more than $333 million to the $8.5 billion iShares MSCI China ETF on Wednesday, in its largest one-day inflow since the fund’s inception in 2011, according to data compiled by Bloomberg.
There’s also been a rush of buying as global funds purchased over $10 billion of onshore stocks in June, the largest monthly inflow since December. Capital flows in China are also set to get a boost when dozens of mainland-listed ETFs are made available to overseas investors through a stock connect program that starts on July 4.
"While most major economies are hiking rates and tightening monetary policy, it's notable that China is moving in the opposite direction. That explains why investors have been migrating to China's equity markets. Still, they remain unpredictable given Beijing's changing tones on industry regulation," said Caleb Silver, Editor-in-Chief of Investopedia.