Foreign investors are making a strong comeback to China’s $19 trillion stock market, three years after retreating and branding it “uninvestable.” The revival in sentiment is being fueled by China’s rapid progress in artificial intelligence, semiconductors, and pharmaceutical innovations, despite ongoing Sino-US tensions and Washington’s tech export bans. A recent tariff truce with the US and domestic monetary easing have further boosted investor confidence.
As a result, the Shanghai Composite Index surged to a decade high last week, while Hong Kong stocks reached their highest levels in four years. Analysts suggest that growing foreign participation could add fresh momentum to a rally that has so far been largely driven by domestic investors. Early movers from the US and Europe are already back, citing the market’s diversification potential and its relative lack of correlation with global peers.
Data supports the renewed interest: August saw the strongest buying of Chinese equities by global hedge funds in six months, according to Morgan Stanley. Morningstar also reported a sharp decline in new fund launches excluding China, highlighting cooling demand for emerging-market portfolios without Chinese exposure.
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