StanChart: Investors confident about stocks, RMB

Despite geopolitical headwinds, international investors are confident about the improved valuations of Chinese stocks and further internationalization of the renminbi amid the country's continued economic growth, said Bill Winters, group chief executive of multinational bank Standard Chartered.

International investors have realized that some of the technologies developed in China are "extremely competitive in any global context", including the open-source artificial intelligence models, electric vehicles, clean energy and other new economy areas, Winters said in an interview during a four-day visit to Shanghai in late October.

There is more room for the Chinese stock market to rise, especially since the valuation of A shares has been relatively lower compared to international peers.

"Chinese companies can produce best-in-class goods, but that is not reflected in equity values. The performance of Chinese companies in the context of a difficult geopolitical situation is reassuring," he said. The "very strong export figures" over the past few months also serves as solid proof of China's manufacturing resilience, according to Winters.

The stress on innovation, technology self-reliance, a social safety net, and support for the private economy, which have been underlined in the communique released after the fourth plenary session of the 20th Central Committee of the Communist Party of China, will address the imbalance in China's economic development. All these will increase consumer confidence and further consolidate the country's continued economic recovery, he added.

At the same time, expanding the offshore renminbi market by offering a full suite of yuan-denominated investment options to international investors and central banks, is an important step to promote the internationalization of the Chinese currency.

Benjamin Hung, president of international at Standard Chartered, said the RMB had made substantial progress over the past few years in making it more investable and hedge-able.

International investors can access China assets via the stock connect and bond connect programs while hedging through the swap connect with interest rate derivatives, he said.

But in general, the world is still very underweight on China. Though the country accounts for 17 percent of global GDP, only about 3 percent of capital is allocated to China assets. While three years ago, Chinese stocks were deemed "uninvestable" due to problems including property market uncertainties, all these have been broadly digested. On top of that, there are the "DeepSeek moments" in the tech sector and better policies for economic growth, said Hung.

Therefore, many international investors have become cornerstone investors in recent large IPOs such as CATL, he added.

The visit to Shanghai in October marked the second time that Winters has come to China this year.

During the recent trip, he met Shanghai Mayor Gong Zheng, who reiterated the city's support for international financial institutions. Standard Chartered is welcome to conduct innovative financial businesses in Shanghai and step up their financial support for outbound Chinese companies, said Gong.

Standard Chartered China's offshore businesses, which support Chinese companies in expanding their overseas footprint, have shown strong growth momentum over the past few years. Therefore, the bank opened a new technology center in Guangzhou in 2022 to complement the teams it had in Tianjin for many years, according to Winters.

Supply chain finance was another focal point of Winters' latest trip.

On the one hand, advancements have been made regarding the technologies and data applied in supply chain finance. On the other, the supply chain itself has been undergoing some changes amid international trade complexities. Helping Chinese companies better fit into the global supply chain will be one major target for Standard Chartered in the years to come, he said.

According to Lu Jing, CEO of Standard Chartered China, Chinese companies usually encounter supply chain problems in financing when they go abroad, as they need solutions to manage their overseas working capital, interest rate and foreign exchange risks.

In addition, small and medium-sized enterprises are playing an important role in today's cross-border supply chains and they also need financing support from financial institutions. Multinational banks with an extensive international network have advantages in this respect to offer them one-stop solutions, she said.