2020 growth against odds, bright future forecasts make China the go-to stock market

With all its pandemic ramifications, the year that was－2020－may have gone down as an annus horribilis for everyone, but it also has been very rewarding for foreign investors who bet on Chinese equities.

For global investors, China's A shares provided a sort of resilience that proved increasingly scarce elsewhere as the world's financial markets progressed through the COVID-19-savaged 2020.

Take China's benchmark CSI 300 Index, which rose 22 percent to 5000.02 points from Jan 1 to Dec 24.During the same period, the MSCI ACWI Index, a key global equity index, was a bit of a contrast as its growth of 12.75 percent in US dollar terms was about half of CSI 300's, according to information provider MarketWatch.

Luca Paolini, chief strategist of Pictet Asset Management, a Swiss firm, said the Chinese A-share market has been a star performer in 2020. "Among major indices, only the Nasdaq Composite Index has done better than the CSI 300. The market also showed more resilience during market turmoil."

Paolini further said the CSI 300's maximum drawdown in US dollar terms, or the biggest decline between the peak and the subsequent trough in the year, came in at 18 percent, compared with 34 percent of global equities and 30 percent of Nasdaq.

Pictet increased its multi-asset exposure to A shares last year to capitalize on China's quick containment of COVID-19, he said.

Many other global asset managers sought shelter in China as turbulence roiled global financial markets in 2020. As of Dec 24, the A-share market saw net capital inflows totaling 195.4 billion yuan ($29.9 billion) via stock connect programs with Hong Kong, according to market tracker Wind Info.

"China was the 'first in and first out' amid the pandemic. So domestic sentiment has really turned positive and global investors are pouring money into the China market," said Wang Qian, the Asia-Pacific chief economist at Vanguard Investment Strategy Group.

Looking ahead, leading global asset managers said they believe Chinese equities will continue to bring solid returns to global investors, on the back of recovering corporate earnings and the promise of breakthroughs in technological innovations like 5G, internet of things, artificial intelligence, industrial internet, robotics, automation, and big data.