(Yicai) Oct. 15 -- Several foreign-funded institutions have said that more overseas long-term funds take a wait-and-see attitude rather than participate in the Chinese mainland stock market after many overseas-listed China equity exchange-traded funds soared and were bought.

Foreign-funded institutions are observing economic data and the improvement of corporate earnings, waiting for the best time to enter the market, they pointed out. China ETFs listed offshore surged after the Chinese government took steps to boost market confidence and the economy on Sept. 24.

US-listed iShares China Large-Cap ETF had assets of nearly USD10.9 billion as of Oct. 11, up 174 percent from Aug. 30, according to data from Futu Holdings. The assets of KraneShares CSI China Internet ETF surged 83 percent to USD7.6 billion and that of ETF-Direxion 223 percent to USD2.6 billion.

Before Sept. 24, the allocation of global actively managed funds to Chinese mainland shares was mostly neutral or low, Shanghai Securities News reported today, citing a foreign-funded institution in Shanghai. However, with the leap in the market, foreign investors began to increase their weight on Chinese stocks, it added.

After a strong rebound late last month, Chinese mainland and Hong Kong stocks have fluctuated recently, leading some foreign-funded institutions to believe that the profit-taking in the early stage may lead to a market correction. With the significantly higher attractiveness and the continuous inflow of foreign capital, mainland shares still have upward momentum, they noted.

"It will take some time for the larger-than-expected stable growth policy since Sept. 24 to be transmitted to the real economy and corporate earnings," said Meng Lei, a Chinese stock strategy analyst at UBS Securities. "With the gradual improvement of economic fundamentals, corporate profits will take advantage of the situation, and the upward space in the mainland market will be further opened up."

"Overseas investors may be waiting for better economic data and a clearer direction of the new policies to enter the market," noted Xu Changtai, chief strategist of Morgan Stanley Investment Management Asia Pacific. "We are more optimistic about consumer-related sectors, including consumption, e-commerce, and internet, because related companies may bring surprising earnings."

The short-term inflow of funds into the Chinese market is mainly transactional and passively managed funds, a foreign-funded institution in Shanghai noted, adding that if China's economy continues to improve, actively managed and allocated funds are also expected to flow in.

Because of the strength of US tech stocks in the past two years, global funds have been overweighting US stocks, with their valuation being significantly higher than other stock markets, said Jason Liu, head of Deutsche Bank Wealth Management's Chief Investment Office APAC. If China's economic data continues to improve, overseas funds will likely increase their holdings of Chinese assets faster, he pointed out.

Editor: Martin Kadiev