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North Bound Stock Connects Surge

CHINA STOCKS

The +1.5% gain for mainland stock indices is driving a resurgence in Northbound stock connect flows. So far today, we have seen just under 12.5bn yuan in flows. This is the largest daily inflow since the end of Jan. The chart below plots the recent evolution of daily flows and the rolling monthly sum.

  • In recent weeks we have gotten back to flat from a rolling monthly sum basis. We were above 151bn yuan at the start of Feb for this metric. This arguably leaves a cleaner slate for more upside in flow at the current juncture, as least form a momentum/positioning standpoint.
  • The CSI 300 holding its 100-day MA is likely helping at the margins in terms of technicals.
  • As we noted earlier in the week, China is seen as somewhat removed from the current turmoil in the global banking system and therefore may attract safe haven related flows.
  • We aren't seeing significant Chian equity index outperformance against the rest of the world though. Still, today's flows are likely helping the China currency. USD/CNH is back sub 6.8650, around 0.45% firmer for the session so far.

Fig 1: Strong Rebound In North Bound Stock Connect Flows

Source: MNI - Market News/Bloomberg

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