Foreign investors boost Chinese stock holdings as AI hardware, green energy lure inflows

Foreign investors increased their stakes in Chinese stocks by approximately one-third during the second quarter, with a particular focus on companies involved in artificial intelligence and green energy initiatives. By the end of June, global fund managers collectively held 10.1 billion shares in mainland-listed companies, a 87% increase from the 7.5 billion held in the first quarter, according to Wind Information.

This growth in foreign investments was driven by gains in stock prices and represented a value of 272.8 billion yuan (US$40.6 billion). The data covered only qualified foreign institutional investor (QFII) participants, which requires regulatory approval and quotas. QFII holdings carry significant weight in the investment community, especially among China's individual investors who often view overseas traders as "smart money."

Foreign investors in the second quarter targeted technology firms and businesses with strong earnings prospects in chipmaking, chemicals, and hardware equipment. Notable companies with substantial foreign investments included Shengyi Technology, a producer of printed circuit boards for AI infrastructure; luxury goods supplier Luxshare Precision Industry; and Shandong Sinocera Functional Material, which manufactures multilayer ceramic capacitors for AI servers and data centers.

Shares of these companies surged significantly, with Shengyi up 225%, Luxshare 43%, and Shandong Sinocera 238%. Additionally, gold producer Zijin Mining Group attracted foreign investment after concerns about US fiscal strain led investors to look for alternatives to dollar assets. QFII investors constituted the top 10 biggest shareholders in 1,102 mainland-listed companies, with major players like UBS Group, Goldman Sachs, and BNP Paribas each holding over 20 billion yuan.

HSBC highlighted opportunities in AI hardware, global strategy firms, and innovative technology companies on China's onshore markets, anticipating an average 90% profit growth for these companies in the current year.