The recent positive outlook on the Chinese market has not yet provided the kind of clarity that most foreign investors are looking for to move beyond a selective strategy. Chinese stocks ended the week with four consecutive days of gains. It was an unusual rise after a dismal start to the year. A combination of official rhetoric, monetary policy moves and media coverage supported the rally from multi-year lows. “The test for a more sustained recovery in stocks will be continued improvement in economic data,” David Chao, global market strategist for Asia Pacific (ex-Japan) at Invesco, said on Thursday. “The hurdles may be even higher this year given the poor performance in recent years.” “Investing in China requires an aggressive strategy,” he said, adding that industries receiving policy support will He emphasized the need to focus. Chao mentioned three things: high-tech manufacturing, robotics, and alternative energy. Policymakers last week signaled they would do more to support the broader economy, but it’s unclear by how much. The People’s Bank of China announced on February 5 that it would cut the reserve requirement ratio, one of its main monetary policy instruments, to a much larger extent than expected. When I asked People’s Bank of China Governor Ban Gongsheng about the impact of the US Federal Reserve at a press conference on Wednesday, he acknowledged that easing would give China more room to ease monetary policy. On real estate, the People’s Bank of China, senior officials from the National Financial Supervisory Authority, and the Ministry of Housing also issued statements this week in agreement on supporting struggling developers. Edward Chan, a director at S&P Global Ratings, said Friday that this type of cooperation “should not be taken for granted.” He pointed out that in the past, the People’s Bank of China tried to support real estate, but the Ministry of Housing’s support was weak. But whether improved coordination necessarily means a general rise in stock prices is another question. The Chinese stock market, where sentiment is low and dominated by individual investors, is no exception. Shering Xie, an individual investor in mainland China’s A-shares, said state-backed buying is supporting stocks with large and small market capitalizations, and he expects they will eventually have to sell. “Decline” [in A shares] That’s because confidence has collapsed, economic fundamentals are too weak, and policy has been slow to respond to deflation,” Xie said in Chinese, translated by CNBC. This melancholy tone is common in many of my conversations in Beijing. Chinese rail equipment maker CRRC, diesel engine and truck maker Weichai Power and factory automation supplier Innovance are among the acquisitions in these categories, HSBC analysts said Thursday. “All three companies are listed on mainland China stock exchanges. Weichai and CRRC are also traded on the Hong Kong exchange. China has said it wants to strengthen its high-end manufacturing industry. Senior officials, including regulators, also spoke about the need to support and develop capital markets.After a year of more false starts than most people can remember, institutional investors in onshore markets “It will probably take a little over a week of good news before interest in the virus increases.” It’s a material rate increase,” said Peter Alexander, founder of Shanghai-based consulting firm Z-Ben. “If the government could come out and say very succinctly this is what we’re going to do, this is how we’re going to do it, that would have a much bigger impact on sentiment,” he said. told me on Friday. Ultimately, Alexander said, China is considering building a financial system in which the stock market does not play as big a role as it does in the United States, and in which it relies slightly more on bank loans. Many international funds have no intention of sitting idle. HSBC analysts said in a Jan. 25 report that Asian funds tracked by HSBC have been reducing their exposure to mainland China since early 2023. As of January 23, foreign institutional investors had withdrawn $4.3 billion from Asian stocks, mainly mainland China and Indian stocks, according to the report. Over the past six months, foreign investors have withdrawn about $30 billion from mainland Chinese A-shares, according to the report. For Citi analysts, this kind of institutional uncertainty about China itself means that exposure to a market recovery could be gained through European agents. Take, for example, LVMH’s surge on Friday after reporting growth in December, including a 30% increase in China. Citi analysts also include Adidas and Korn in their basket of European stocks with China exposure. —CNBC’s Michael Bloom contributed to this report.