Foreign investors pump record amount into China‘s stocks in January

January was a record month for foreign investors putting money into Chinese equities through Stock Connect, with 61 billion yuan (nine billion U.S. dollars) heading northbound into mainland markets.

Stock exchange data showed record net monthly inflows via the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs last month, marking a rebound for China's indices which endured a torrid 2018.

The Shanghai Composite Index was the world's worst-performing index last year, falling 24.6 percent over 12 months. However, 2019 has seen investors return with renewed optimism, and a sense that the only way is up for bottomed-out mainland markets.

Since the start of the year, the CSI 300 index, a measure of Shanghai and Shenzhen blue chip companies, has increased by more than eleven percent.

For foreign investors, optimism about China-U.S. trade talks and relief for emerging markets after the U.S. Federal Reserve put off any further rate hikes in the next few months have combined to make Chinese equities an enticing opportunity.

Many analysts have pointed at China's low price-to-earnings ratio, making it one of the "cheapest" and most undervalued indices for global investors.

Chinese authorities have also looked to make China's indices more attractive and easier to navigate for foreign investors.

An expansion of quotas for Qualified Foreign Institutional Investors (QFIIs) unveiled earlier this year aims to improve the environment for approved overseas institutions looking to buy mainland equities, while new rules announced last year further open up mainland markets to foreigners working in China.

According to Morgan Stanley, 2019 should be a record year overall for foreign investors in mainland markets, with as much as 125 billion U.S. dollars' worth of inflows expected.