Last week, the Chinese yuan experienced a significant appreciation, with the upward trend continuing into this Monday. The highest exchange rate of the yuan against the US dollar reached 7.02, seemingly on the verge of breaking through 7.0. Corresponding to the previous decline when it broke below 7.0, this time's approach to 7.0 is referred to as the reverse breaking of 7. However, unfortunately, starting from Tuesday, the yuan began to fall from 7.0224, reaching a low of 7.1787 yesterday, with a decline of nearly 1600 points over three trading days. Has the yuan's reverse breaking of 7 failed, indicating a massive sell-off of Chinese assets?

The following data, however, draws the opposite conclusion.

01. Continuous foreign capital inflow

During these days of exchange rate depreciation, we observed that foreign capital is continuously buying Chinese assets, which is completely contrary to expectations. Recently, for several consecutive days, northbound capital has been net buying, indicating that foreign institutions are investing real money, not just verbally bullish.

Starting from last Friday, northbound capital showed a net purchase of nearly 15 billion yuan, and this Monday, the net purchase rose to 16.6 billion yuan, which is also the largest single-day purchase amount for the entire year of 2022 so far. In the following four trading days, although the net inflow amount decreased, the direction did not change. Including Wednesday and Thursday, when the stock market experienced fluctuations and declines, northbound capital still maintained a net inflow.And on Friday, the net inflow rose to 5.1 billion yuan.

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02, Foreign Institutional Viewpoints

Fidelity Funds pointed out that currently in the global asset allocation, Chinese assets are still under-allocated. However, Fidelity believes that Chinese assets should be over-allocated, which means that foreign capital will continue to accelerate the purchase in the future.

In order to continuously attract more foreign capital into A-shares, the China Securities Regulatory Commission (CSRC) has also frequently relaxed various policies to make it more convenient for foreign capital to participate in transactions.

On the one hand, it expands openness, and on the other hand, China's capital market is also deepening reforms to enhance long-term overseas capital inflow.

For this reason, strategists at JPMorgan also pointed out that it is a good opportunity to buy Chinese assets now. JPMorgan is willing to buy at this time and hold for a long time, allowing China's capital market to bring good long-term returns to global investors.

03, Foreign Capital Holdings

On the other hand, we can also see from the data of position changes that many large funds are continuously buying Chinese concept stocks, including Bridgewater and Jinglin, etc.

For example, in the position data announced by Hillhouse Capital, we can see that among the top ten heavy stocks, there are 7 Chinese concept stocks, accounting for more than 60% of the total market value.

In the third quarter of this year, the fund significantly increased its holdings in Pinduoduo by 610,000 shares. In addition, it bought 347,000 shares of Alibaba and 1,867,000 shares of Beike.Additionally, Jinglin Assets primarily purchased New Oriental, Pinduoduo, and NetEase.

During this period, these foreign investment institutions have expressed their interest in Chinese assets in various settings. The data now released also shows that they are buying Chinese assets with real money, demonstrating confidence in the future development of China's economy.

04, Selling US Dollar Assets

Conversely, the data shows that funds continue to sell US assets.

In the past few days, the three major US stock indexes have continued to decline.

So far this year, the three major indexes have fallen by 10% to 30%, indicating that funds have been selling.

The situation in the US Treasury market is similar, with Japan and China, the two largest creditors, selling a large amount of US debt. In addition, six out of the top 10 "big creditors" are also selling vigorously.

After this year, it is believed that the power comparison between China and the United States has undergone tremendous changes, both in finance and in the economy.

Chinese assets continue to be favored by foreign capital.