Investors see stronger signs of China market bottoming out

Rebound in Chinese stocks, return of foreign inflows among positive shifts

After multiple false dawns over the past year, some investors are seeing evidence that the recent rebound in Chinese stocks may be different.

Beijing's determination to end a rout, signs that the economy and earnings are picking up, and a return of foreign inflows are giving investors from abrdn to M&G Investment Management reasons to believe that the market is bottoming out.

The shift reflects how investors are coming to terms with China's attempts to restructure its economy, with some betting that President Xi Jinping's attempt to drive high-tech growth and end a property crisis will start to bear fruit.

Equity benchmarks have rebounded more than 10 per cent from a February low, a performance that likely shows there were buyers beyond state funds.

"Numerous companies and sectors continue to experience a recovery in revenue and earnings, which should help the share prices of these stocks and sectors," said Mr Nicholas Chui, portfolio manager at Franklin Templeton Emerging Markets Equity.

"We also expect sectors other than property to take shape and become stronger over time. This will allow the economy to continue to transition away from property in a sustainable manner," he said.

The current sentiment marks a sharp improvement from just months ago, when Chinese shares were among the world's worst performers and some big-name investors were cutting exposure.