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<Research>Daiwa Foresees Slower Foreign Capital Return into CN Stock Mkt Next Yr
Recommend 21 Positive 41 Negative 14 |
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From November 3 to 7, Daiwa met with 22 investors in Europe, the broker said in its report. Among the 11 investors who shared their shareholdings (mainly global EM funds or Asian funds), 90% were Neutral or Overweight on the Chinese market, starkly higher than the 60% from recent interactions with U.S. investors. However, this “optimism” mainly reflected portfolio rebalancing during the Chinese stock market's revaluation process. Most European investors remained concerned about China's deflation, and with limited upside for valuation multiple expansion, investors are waiting for earnings to catch up before considering increasing their positions in the Chinese stock market. Similar to their U.S. counterparts, European investors' positions in the Chinese stock market are now highly concentrated in a few large caps, such as TENCENT (00700.HK), BABA-W (09988.HK), CATL (03750.HK), and AIA (01299.HK), reflecting that the market uptick steered by large techs may slacken. Although most investors are optimistic about China's AI and high-tech “localization” story in the long term, some investors believed related trades look overheated in the near term and are thus seeking diversification ideas in defensive industries. Daiwa continued to recommend investors diversify into domestic demand sectors such as beverages, healthcare, and high-dividend industries (such as finance, home appliances, and shipping) to cope with market volatility in 4Q25. On the ride of policy tailwinds, potential easing of geopolitical tensions before Trump's visit to China, and ongoing liquidity support from domestic investors, the broker stayed constructive on the market outlook for 1H26. However, with the “mean reversion” part of global fund relocation almost done, the pace of foreign capital return into the Chinese stock market is expected to slow down in 2026. AASTOCKS Financial News Website: www.aastocks.com |
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