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Foreign investors have barely begun buying back beaten-down stocks in China, but there are growing signs that the end of the country’s tough COVID-zero policy marks the beginning of a long global march back into Chinese equities.

MSCI China has gained a staggering 50 per cent since November, when hopes of reopening first emerged, while Hong Kong’s Hang Seng Index is up 47 per cent, against roughly 6-per-cent gains for world stocks.

But participation has been narrow, with brokers and analytics firms attributing most of the gains to short-covering and fast money – leaving lots of room for flows from slower-moving institutional investors to drive the rally further.

Shifts in tone at big banks suggest they are warming up to Chinese equities, especially as the strong returns so far and the fear of missing out on more gains start to apply pressure.

“The economic and market effect of that reopening is just beginning to be felt,” said Ken Peng, head of Asia investment strategy at Citi Global Wealth Investments, who expects foreign inflows big enough to lift the yuan this year.

“This is still a long path and we remain very bullish on Chinese equities … and also the currency,” he said.

J.P. Morgan Asset Management is in the process of raising allocations to Chinese equities as the government’s dismantling of COVID restrictions puts the economy on a recovery path, while in developed markets including the United States, policies remain tight as central banks try to curb inflation, said Sylvia Sheng, global multiasset strategist based in Hong Kong.