China's $19 trillion stock market attracts foreign investors again

Foreign investors are plotting a return to China's $19 trillion stock markets in a big way three years after pulling back and terming them uninvestable, encouraged by the tech opportunities on offer, and a growing demand for diversification beyond US assets.

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Progress in China's adoption of artificial intelligence and its development of semiconductors and innovative drugs this year has given comfort to global investors that the Sino-US trade war and Washington's tech export bans have not deterred innovation in the world’s second-biggest economy.

The US-China tariff truce and a domestic monetary easing environment have further boosted sentiment. As a consequence, the Shanghai Composite index touched a decade high last week while Hong Kong stocks hit a four-year high.

The changing sentiment of foreign investors could potentially add fuel to the market rally, which has so far been mainly driven by domestic players.

Foreign early birds are already back in China, lured by this year’s bull run and as they seek diversification from crowded US assets, said Brett Barna, a former hedge fund manager who now manages two New York-based single-family offices.

“China is interesting because it’s very uncorrelated to the rest of the world, at least the onshore A-share market,” Barna said, adding he plans to set up an investment platform that would allow US and European capital to access China's capital markets.

Data on fund launches and flows illustrates the growing enthusiasm for a $19 trillion Chinese stock market, including Hong Kong.