A-shares stabilizing amid trade tensions

With rising strategic importance in terms of improving expectations and boosting confidence, China's capital market now provides opportunities for both Chinese and foreign investors as global economic growth stagnates due to Sino-US trade frictions, experts said.

Their comments followed messages delivered during a State Council executive meeting on Friday, which included making continuous efforts to stabilize the stock market and advance the sound and stable development of the property sector. Once related measures are introduced, they should affect targeted companies and individuals directly. The implementation efficiency of the measures should be improved and their effect ensured, according to the meeting.

The benchmark Shanghai Composite Index gained 0.45 percent on Monday while the Shenzhen Component Index closed up 1.27 percent. The tech-heavy ChiNext in Shenzhen jumped 1.59 percent.

The A-share market is crucial for lifting market confidence during trade tensions. Investors should be confident in China's dedication to safeguarding the stability of its capital markets, said Qiu Xiang, chief A-share market strategist at CITIC Securities.

Economic resilience is crucial during the ongoing stalemate. China has more choices and room for more policies, helping it to last longer during the tensions. But the huge amount of government debt that will mature or need refinancing before July will serve as the first turning point for US tariff policies, said Qiu.

Against such a backdrop, self-reliant technology companies, sectors benefiting from Europe's increasing capital expenditure, consumer staple providers and companies generating stable dividends are worth looking at in the A-share market, he added.

Market turmoil and volatility continued in overseas markets last week, indicating continued external pressure. But the Chinese market is stable, thanks to its recovering economic fundamentals and quick responses to recent uncertainties, said Zhang Qiyao, chief strategy analyst at Industrial Securities.

Meanwhile, China's dual circulation development pattern and the country's strategic focus will help to anchor market stability, said Zhang.

Experts from Huaxi Securities wrote in a recent report that the Chinese mainland and Hong Kong stock markets may serve as havens for foreign investors, while other markets are undergoing more drastic fluctuations in the short term and global economic growth faces more uncertainties.

The Chinese government has been dedicated to advancing supply side reform and deeper restructuring. Combined with its continued efforts in expanding domestic demand, Chinese firms are provided with a better environment, which means new investment opportunities, Huaxi said.

In addition, Chinese equity assets now enjoy more valuation advantages compared to their foreign peers. The former's investment value over the mid to long term is especially noticeable. The market should not underestimate policymakers' resolution to stabilize market performance and investor expectations, they added.

During a forum on Sunday, Liu Yuhui, a council member of the China Chief Economist Forum, said that now is a good time to invest in the A-share market, as it is projected to enjoy longer-term prosperity. Investors are especially advised to look for opportunities in core China assets, whose investment value has been manifested during the China-US trade frictions, he said.

Fu Si, China portfolio strategist at Goldman Sachs, said that global actively managed funds and overseas hedge funds have increased their exposure to A shares since the beginning of the year, mainly driven by the rapid development of Chinese artificial intelligence technology. But their current exposure is still lower than historic levels, while selling room is limited. Therefore, global capital will flow back to the A-share market in the mid to long term, Fu said.

As of the end of March, qualified foreign institutional investors have increased their holdings in A shares — both in terms of volume and market value — on a quarterly basis, according to market tracker Wind Info. QFII held at least 500 million yuan ($68.6 million) worth of shares in Zijin Mining, Centre Testing International Group and China XD Group each, with the latter — a transmission and distribution equipment maker — seeing the most rapid increase of QFII holdings in the past three months.