In recent weeks, the stock market in China has experienced a notable correction, a development that has raised eyebrows among investorsHowever, this retreat is not viewed negatively; rather, it presents an opportunity for astute investors to re-enter the market at lower valuationsIn a recent report issued by Goldman Sachs on May 29, the firm's chief strategist for Chinese equities, Liu Jingjin, alongside his team, has reinforced their bullish stance on the A-share marketThey predict that the CSI 300 index could soar by roughly 14% over the next 12 months, striding towards renewed growth.

Goldman Sachs has indicated clear evidence of a policy support mechanism in place, stating that the Chinese government has rolled out an array of supportive policies aimed at buttressing the stock marketThis is particularly evident in the realm of real estate and local government bonds, where effective measures are being initiated to alleviate tail risks associated with the stock market

Such efforts have helped to bolster market confidence and enhance the intrinsic value of Chinese equities.

On May 20, Goldman Sachs had already raised its 12-month target for the MSCI China Index, bumping it up from 60 to 70 pointsThe target for the CSI 300 was also adjusted upward, from 3,900 to 4,100 pointsThe firm maintains an optimistic outlook on the technology, media, and telecommunications (TMT) sectors, which continue to be bolstered through favorable policies and market demand.

This week, while the broader market may not have performed spectacularly, foreign capital has reiterated its optimistic viewpoint concerning Chinese assetsDuring the "Outlook for Mainland and Hong Kong Stock Markets" forum held on May 28, Wang Zonghao, the head of China equity strategy research at UBS, expressed that the macroeconomic conditions of the current A-share market resemble the environment seen in 2015-2016, albeit with a crucial difference: the fundamentals of listed companies are currently stronger than they were at that time.

With the MSCI China currently trading at an attractive valuation of just around 10.5 times earnings, Wang suggests that considerable upward potential remains

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He emphasizes that the market is currently undergoing a phase of consolidation that signals a positive turn for investors.

When it comes to sector allocation, Wang offers specific advice: on one hand, investors should consider increasing their holdings of high-dividend stocksMany companies have elevated their dividend payouts due to shareholder demands and favorable policiesAdditionally, the yield on the ten-year government bond is at a historical low, creating a favorable spread for dividend yield offerings.

On the other hand, Wang advocates for a more aggressive portfolio allocationHe points towards essential sectors such as education and training, as well as consumer industries like beer, where price increases are anticipatedFurthermore, with regard to the Hong Kong market, he highlights that investment in internet companies could be a wise move, particularly with expectations of more foreign capital inflow.

As qualified foreign institutional investors (QFIIs) continue to play a pivotal role in the A-share market, their movements are closely monitored by market participants

Although the latest changes in QFII holdings for the second quarter remain unknown, historical data indicates that QFIIs typically engage in longer-term investments, often exceeding three yearsThis long-term focus enhances their approach to fundamental research and value discovery versus engaging in short-term trading.

As highlighted, QFII investments can be quite significant, with the largest holding being Ningbo Bank, which the Overseas Chinese Banking Corporation of Singapore has maintained since the bank’s initial public offering—now for over 17 years.

At the end of the first quarter of this year, QFIIs had established positions in the top ten shareholders of 719 A-share companiesThis included 320 new positions, while increasing stakes in 166 previously held companiesFor instance, Hengshuai Costood out with its highest noted increase in holdings, as both the Macao Monetary Authority and the Kuwait Investment Authority made their entry as significant shareholders, collectively holding over 11% of the public float.

It is also worth noting that QFIIs maintain high performance expectations for their portfolio companies

Observations indicate that Hengshuai Coachieved revenues of 242 million yuan in the first quarter, reflecting a year-on-year growth of nearly 32%. Their net profit surged 58.6%, indicating robust operational health.

Notably, the company specializes in micro-motor technology, with endeavors towards scaling up cleaning operations through intelligent automation, positioning itself well in growth sectorsAnalysts predict that revenues could reach 1.207 billion yuan, 1.548 billion yuan, and 1.931 billion yuan consecutively from 2024 to 2026, with respective growth rates suggesting continued strong performance.

Additionally, Guanglong Energy has garnered interest from major investment firms including Barclays, Goldman Sachs, and JPMorgan Chase, with their aggregate holdings representing around 5% of the company's publicly traded sharesThis trend of active investment surveillance from foreign capital into A-share companies demonstrates a solid commitment, as research indicates that over 628 A-share companies have drawn interest from external institutions.

Furthermore, Middle Eastern investors are increasingly investing real capital into Chinese assets