Foreign institutions start the year bullish and increase their holdings in Chinese assets

Reporter Tian Peng

Since the beginning of 2026, global capital has continued to show strong enthusiasm for allocating assets in China. From heavy buying in the Hong Kong stock market to sustained inflows into overseas thematic ETFs, from positive outlooks in institutional reports to actual accelerated capital inflows, foreign investors are demonstrating a “bullish and optimistic” dual approach, reflecting firm confidence in China’s economic resilience and asset value.

Experts interviewed by Securities Daily generally agree that increased foreign investment in Chinese assets is a rational choice driven by multiple positive factors. The core reasons focus on three dimensions—fundamentals stabilizing and improving to strengthen the foundation, valuation advantages becoming more attractive, and ongoing opening-up benefits enhancing accessibility. Meanwhile, as China accelerates industrial upgrades, companies with sustained R&D capabilities and global strategies will become the long-term core of foreign allocations. Structural opportunities led by tech stocks are expected to persist throughout the year, and Chinese assets are becoming key targets for global capital allocation thanks to clear growth logic.

Frequent Investment Moves

Foreign investors’ preference for Chinese assets is first reflected in tangible increased holdings. Since the start of the year, international capital, represented by JPMorgan Chase and BlackRock, has launched a “buy-up” mode, increasing their holdings of Chinese assets.

Data from the Hong Kong Stock Exchange shows that since the beginning of the year, JPMorgan has invested over HKD 1 billion to increase holdings in several Hong Kong-listed companies across sectors such as new energy, biomedicine, communications, and real estate. Specifically, on January 2, JPMorgan invested HKD 408 million to buy 795,350 shares of CATL, HKD 249 million to buy 3.173 million shares of Innovent Biologics, HKD 63.47 million to buy 1.1839 million shares of Ganfeng Lithium, and HKD 11.86 million to buy 3.5452 million shares of Vanke. On January 5, JPMorgan continued its buying spree, investing HKD 246 million to acquire 46.6683 million shares of Alibaba Health and HKD 106 million to buy 9.1349 million shares of China Tower.

Notably, overseas thematic ETFs have become an important channel for these capital allocations, consistently experiencing net inflows. Among them, technology ETFs performed particularly well. For example, the Invesco China Technology ETF had an asset size of USD 3 billion as of January 8, up 6.53% from USD 2.818 billion at the end of last year.

Qian Qing, CEO of Morgan Stanley Securities (China), stated that foreign capital is actively investing in China’s advanced industries, such as biomedicine and new energy, which are highly competitive and attractive for foreign assets.

Furthermore, the scope of capital inflows has extended into the bond market, becoming a new allocation hotspot for foreign investors. For instance, in the primary market, foreign panda bond issuance has gained momentum. On January 7, Henkel Germany issued a RMB 1.5 billion panda bond, marking the first foreign panda bond issuance of 2026. On January 8, Barclays launched a RMB 4 billion panda bond, demonstrating foreign investors’ recognition of RMB-denominated bonds.

Bai Xue, Senior Deputy Director of the Research and Development Department at Orient Securities, told Securities Daily that mechanisms like “Bond Connect” and “Swap Connect,” along with the inclusion of Chinese bonds in more international indices, are significantly increasing the attractiveness of panda bonds for long-term global investors. Additionally, the growing demand from sovereign wealth funds, pension funds, and asset managers will further motivate foreign institutions, international organizations, and multinational companies to participate in this market.

Collective Optimism from Institutions

Behind the increased holdings by foreign investors is a collective positive outlook and proactive forecast from leading institutions. Recently, Goldman Sachs, JPMorgan Chase, Morgan Stanley, UBS, and others have issued reports raising their economic growth forecasts and index targets, maintaining a “overweight” rating on Chinese assets.

For example, Goldman Sachs recently released the “China 2026 Outlook: Exploring New Drivers,” projecting that China’s real GDP will grow by 4.8% in 2026, above the consensus estimate of 4.5%. They also forecast that the MSCI China Index and the CSI 300 will rise by 20% and 12%, respectively, within the year. By the end of 2027, Chinese stocks could see a cumulative increase of 38%.

Looking further, continuous earnings recovery is a key support for institutional bullishness on Chinese assets. Most institutions believe that the driving force for China’s stock market is shifting from valuation repair in 2025 to earnings growth in 2026. Goldman Sachs expects corporate profits to grow by 14% and 12% year-over-year in 2026 and 2027, respectively. UBS forecasts that the profit growth rate of all A-share companies will increase from 6% in 2025 to 8%, supported by rising nominal GDP and policies aimed at reducing internal competition, which will help restore profit margins.

Valuation advantages further enhance China’s global appeal. Compared to major markets worldwide, the Hang Seng Index’s current P/E ratio is about 8.2, below its historical average and significantly lower than the S&P 500’s 21.3 and the Nasdaq’s 28.7. Goldman Sachs’ strategists believe that the valuation discount already reflects market concerns about various risks. As fundamentals stabilize and policy uncertainties decrease, valuation repair has considerable room, and by 2026, Chinese assets are expected to revert toward global averages, generating substantial valuation uplift.

The dual effects of industrial upgrading and policy dividends reinforce institutional confidence in China’s long-term growth prospects. The “Catalogue of Industries Encouraged for Foreign Investment (2025 Edition),” set to be implemented on February 1, 2026, expands the scope with 1,679 entries, guiding foreign investment toward advanced manufacturing, modern services, high-tech sectors, and regions such as the central and western parts, northeast, and Hainan. Investment in these areas will enjoy preferential policies on tariffs, land use, and taxes. On the capital market side, efforts continue to optimize QFII access, expand futures and options to more investors, and improve listing mechanisms for overseas companies, including the Hong Kong Market’s Chapter 18A and 18C, facilitating easier participation in A-shares and Hong Kong stocks.

Wang Ying, Chief Equity Strategist at Morgan Stanley China, stated in a recent report that more foreign capital will return to China in 2026, and increasing allocations by active funds to Chinese assets is only a matter of time.