Foreign capital saw a net inflow of about 200 billion yuan into A-shares in April, marking the highest level since January this year.

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Foreign investors’ confidence in the Chinese stock market rebounded significantly in April.

Bloomberg data shows that last month, overseas capital’s net inflow into A-shares reached about 200 billion yuan (approximately 29 billion dollars), the highest level since January this year.

This capital flow took place against the backdrop of a strong rebound in the technology sector. Investors focused on expectations of productivity gains driven by artificial intelligence, choosing to downplay the geopolitical disturbances caused by the Iran war. The CSI 300 Index rose 8% in April and has further increased by 0.9% so far in May.

The accelerated inflow of foreign capital is providing A-shares with important incremental marginal support, and to some extent also confirms a recovery in market risk appetite for Chinese assets.

AI Theme Boosts Sentiment, Tech Sector Leads Gains

The direct catalyst for the return of foreign capital in April was the tech rally centered around artificial intelligence. Investors reassessed the long-term value of productivity improvements driven by AI, boosting related sectors and partly offsetting the risk aversion brought by the escalation in the Middle East.

The CSI 300 Index jumped 8% in April, showing outstanding performance among major global stock indices, and has continued its upward trend since May. Net inflows of foreign capital and the index’s gains have reinforced each other, signaling a phase of recovery in market sentiment.

This data is benchmarked to January. Bloomberg data shows that January’s net inflow of foreign capital into A-shares was previously the highest for any month this year, and the surpassing April data means that foreign investors’ appetite for A-shares has returned to the level at the beginning of the year.

Looking at the year overall, the initial outbreak of the Iran war triggered a brief exit of foreign capital, but as the market digested geopolitical risks and the AI narrative continued to strengthen, there was a clear trend of capital returning in April.

The above-mentioned 200 billion yuan is Bloomberg’s estimated figure, calculated as follows: From the total balance of China’s cross-border securities investments, major observable sub-items are excluded, including net flows of domestic investors buying and selling overseas assets via the Stock Connect mechanism, net increase of Chinese financial institutions’ holdings of foreign currency bonds, as well as changes in overseas investors’ holdings of domestic bonds. The remaining amount is used as a proxy indicator for foreign capital inflows to A-shares.

This estimation method covers most main sources of cross-border capital flows, but excludes quota-based programs such as Qualified Domestic Institutional Investor (QDII) and Qualified Foreign Institutional Investor (QFII).

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