BEIJING, 1st August, 2023 (WAM) — International investment and securities firms anticipate a rebound in China’s stock market in the second half of 2023 as the country rolls out more stimulus policies to boost economic recovery.

This optimism comes following a pivotal meeting where the tone for China’s economic policy for the second half of the year was set.

Global investment bank Goldman Sachs, in a recent analysis note, expressed that while concerns over structural growth remain, a window for a tactical rebound in China’s stock market has now opened.

The market perceives the meeting’s policy loosening as a surprise upturn. Goldman Sachs noted that historical trends suggest Chinese equities are likely to perform better in the coming months.

The A-share market in China has experienced a significant uptick in sentiment, with foreign capital showing faith in a recovery of the world’s second-largest economy.

Northbound funds, a crucial channel for foreign-funded institutions to participate in China’s A-share market, have markedly increased their presence since July 2023. This trend reflects an enduring belief in the long-term fundamentals of China’s economy, according to experts and financial institutions.

Net purchases by northbound capital reached 9.35 billion yuan ($1.3 billion) on Monday, bringing July’s cumulative net purchases to 47 billion yuan, the highest since January 2023, as per data from Eastmoney.com. These figures underscore overseas investors’ robust confidence in the ongoing recovery of the Chinese economy.

Official data reveal that net inflows of northbound capital exceeded 180 billion yuan in the first half of 2023, up 155.33 percent year-on-year. Meng Lei, a Shanghai-based strategist at investment bank UBS, estimates a net inflow of 300 billion yuan for the full year.

Chen Li, chief economist of Chuancai Securities, told the Global Times on Monday that foreign capital is expected to continuously flow into the A-share market in the second half of the year. He anticipates further concrete measures from various government agencies and local governments following the crucial meeting.

At the meeting, held by the Political Bureau of the Communist Party of China (CPC) Central Committee, measures were called for to actively expand domestic demand, drive economic growth through consumption, and promote private investment. The meeting acknowledged the domestic economy’s challenges, including insufficient domestic demand, difficulties in enterprise operation, risks in key areas, and a complex external environment.

Meng predicts a roughly 10 percent increase in earnings for companies listed on China’s stock market this year. With more favorable measures and pledges on the horizon, Meng asserts that the risk-reward ratio of A-shares will be more attractive than before.