China's major offshore stock indexes extended their rally during the country's eight-day National Day and Mid-Autumn Festival holiday, which began on Wednesday, and closed at multi-year highs on Thursday.
By the end of trading on Thursday, the MSCI China Index, which tracks Chinese stocks, rose 1.42 percent, climbing back above the 90-point threshold for the first time in four years and hitting its highest level since September 2021. The Nasdaq Golden Dragon China Index, a benchmark for U.S.-listed Chinese companies, gained 1.06 percent, hitting its strongest level since December 2021.
The Chinese offshore stock market has shown strong momentum this year. The MSCI China Index has surged more than 40 percent year-to-date, while the Nasdaq Golden Dragon China Index is up over 30 percent.
Timothy Moe, Goldman Sachs' chief Asia-Pacific regional equity strategist, said China's strong market performance this year is drawing increased global attention. He expected that capital flows would likely tilt further toward Asia, particularly China, as the Federal Reserve gradually advances its easing policy and the U.S. dollar weakens.
"So the fact that China has been able to outperform the US market is encouraging people to look at China in a more constructive manner. When we are in an environment where the Federal Reserve is cutting rates and also where the U.S. dollar is depreciating, that tends to be a very favorable environment historically for Asian equity markets more broadly," he said.
Goldman's latest report also recommends overweighting both onshore and offshore Chinese assets.
U.S. investment management company Invesco's flagship Developing Markets Fund has also ramped up exposure to Chinese equities. As of the end of July, its holdings showed sharp increases in consumer and technology stocks, including a 1,112 percent year-on-year increase in JD.com shares and a 187 percent rise in Alibaba shares.
"With Emerging-market (EM) equities trading at around a one-third discount valuation relative to their developed market peers, I believe that there's good value to be had. I continue to think that the tech sector is likely to continue to do well. Also, there's been very good development in Chinese tech, in Chinese AI, and I think that that continues to be a very important development in attracting foreign capital," said Zhao Yaoting, global market strategist at Invesco for Asia Pacific.
Chinese offshore stock indexes hit multi-year highs on holiday rally
