Post-COVID, foreign investors significantly reduced Foreign Direct Investment (FDI) in China as shown in the chart below. However, as China has launched it's stimulus package to save its economy, these investors now face a "fear of missing out" (FOMO) on potential opportunities in the stock market and are returning as seen in the last week. But this will take time.
In Q2 2024, the People’s Bank of China (PBOC) conducted a survey of 20,000 depositors in 50 cities across the country. As shown in the chart below, respondents are more willing and have been saving more in the last few years. In fact, ther household savings reached a record high of $19 trillion. With the start of the bull run in the Chinese stock market, how long will it be before these funds from the savings flow into the stock market. Can you imagine the liquidity into the stock market even if it is just a small percentage from this $19 trillion.
As the Chinese stock market is just out of the pessimism, most of the retail investors are still questioning if the spike is real and can be sustainable, so we are still far from the "Euphoria" stage of the emotion. Thus the bull run should be able to continue for now.
source: https://prosperion.us/commentary/timeless-truths-cycle-market-emotions/
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