Natixis reports that the two key factors driving foreign capital inflows into China's securities investment, China's equity bonds, are unsustainable, suggesting that China's foreign capital inflows may slow down in the future, but when external conditions improve, China is based on The low participation of foreign capital, coupled with the huge size of the economy and financial markets, should redistribute more capital to China's assets.
According to the analysis of the report, there are two key factors for China's securities investment inflows: one is that China's equity bonds are included in the global index to facilitate the reallocation of foreign capital assets; the other is the shelter effect of emerging markets.
However, the bank believes that the above factors are not sustainable. On bonds, although it is crucial to include global indices, this impetus may be weakened if China fails to attract capital inflows other than passive funds, coupled with the continued easing of the central bank.
On the stock side, the current A-share market is relatively small, but capital inflows seem to have gone beyond passive asset allocation, but the unsatisfactory performance of the stock market in the past few months may reverse the inflow trend.
In the long run, the QFII quota has increased, and the number of participating institutions in the bond-equity interoperability mechanism in Hong Kong has been increasing. Due to the low participation of foreign capital, coupled with the huge size of the economy and financial markets, foreign capital should redistribute more funds to Chinese assets. At present, the foreign debt holdings of the United States, South Korea and Japan are 21%, 11% and 12%, respectively. In terms of foreign equity holdings, the United States is 14%, and Asian peer countries are relatively higher, with South Korea and Japan being 32% and 30% respectively.
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