(Yicai Global) Feb. 24 -- Foreign investors have adjusted their strategies in China, moving from real estate and internet companies to new energy and advanced manufacturing, after the turbulent year of 2021, weighed down by regulatory issues.

The "old heroes," represented by real estate firms, are fading out, Liu Mingdi, chief China equity strategist at JPMorgan Chase & Co., said to Yicai Global. Meanwhile, the "latest heroes," namely internet companies, are increasingly subject to tight regulation.

However, China is also bringing up "new heroes," such as new energy, advanced manufacturing, and other technology companies, that will become new engines of economic growth, Liu added. With the rise of fresh players, foreign investment banks can benefit from their initial public offerings, mergers and acquisitions, and rights issues.

Foreign investors have been keeping an eye on the Chinese real estate market. The once high-yielding US dollar bonds of Chinese property companies are no longer favored by Wall Street as the mainland's financing environment has tightened and several well-known players, including China Evergrande Group, have defaulted on their debts since the second half of last year.

Another loser is the internet sector. Chinese internet companies' equity prices slumped in the United States and Hong Kong last year amid regulatory pressures. Shares of e-commerce giant Alibaba Group Holding [NYSE: BABA] and phonemaker Xiaomi [HK: 1810] dived more than 40 percent in value. Search engine developer Baidu [NASDAQ: BIDU] dropped more than 30 percent. WeChat operator Tencent Holdings [HK: 0700] declined nearly 20 percent.

Some investors are optimistic. "Short-term policy adjustments may result in performance setbacks, but after an adaptation period of a year to two years, the industry will see a revival," Meng Ning, managing director of Chinese equity investments at New York-headquartered Neuberger Berman, said to Yicai Global. The company has been investing in the internet industry since late 2021.

"Some giants' valuations are close to 20 times their price-earnings ratios, starting to show their significance in allocation," said Meng. "As long-term investors, we are willing to buy and hold them for a long time, waiting for the market to rebound,” he added.

Last December, the US Securities and Exchange Commission finalized its rule to allow the regulator to delist foreign stocks that fail to meet audit requirements, a much-debated move in China. Meanwhile, Chinese firms have been looking elsewhere. Baidu, Bilibili, and Trip.Com completed their secondary listings in Hong Kong in 2021. Moreover, Hong Kong Stock Exchanges and Clearing announced last November that it would lower the threshold for secondary listings.

The overseas downturn has done little to control Chinese firms' financing demand. Chinese companies raised a record high of more than USD310.3 billion last year via global stock and equity-related issuances, according to data from Goldman Sachs. Equities offered on the mainland tallied USD173.7 billion, making up 56 percent of the total, and rising 23 percent from a year ago.

Editor: Emmi Laine