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SHANGHAI : In less than three weeks of 2023, foreign buying of Chinese stocks has exceeded last year's total as investors bet on the country's rapid recovery after COVID-19 lockdowns were lifted.

Overseas funds snapped up big-cap blue-chips from consumer staples to financial firms at record pace for fear of missing out on gains and lagging behind their peers.

They purchased a net 91.2 billion yuan ($13.45 billion) of China stocks via the Stock Connect scheme so far in 2023, compared with a total 90 billion they bought in 2022. The amount invested during the 11-day buying streak was also the biggest monthly inflow on record.

The inflows follow China's relaxation of its zero-COVID strategy in December, a policy that sapped consumption and production.

Until Jan. 17 this year, foreign investors had bought a net 7.2 billion yuan ($1.06 billion) of battery giant Contemporary Amperex Technology Co Ltd -- the stock that drew the largest net inflow, according to Reuters caculations of exchange data.

They also purchased a net 7.1 billion yuan of Ping An Insurance Group and a net 6.4 billion yuan of liquor producer Kweichow Moutai Co, respectively.

"Buying those index-heavyweights shows foreign investors' confidence in China's economic recovery this year," said Daisy Li, fund manager at EFG Asset Management.

Linus Yip, chief strategist at First Shanghai Securities said foreign funds tend to invest in large-cap Chinese companies, which are relatively stable and attractively valued.

The fast appreciation in China's currency has also lured foreign money into China assets, EFG's Li added. China's yuan had gained roughly 2% against the greenback so far this year.

The CSI 300 benchmark is up roughly 7% so far in 2023, and 18% higher than at end-October, a recent trough.

Hong Kong's Hang Seng benchmark has soared nearly 50% since October.

"Some foreign investors are playing catch-up by snapping up China A-shares, which lag Hong Kong's strong rally," said Xia Chun, chief economist at wealth manager Yintech Investment Holdings.

International banks including Goldman Sachs and Morgan Stanley have upgraded their China growth forecast to at least 5.5% in 2023, expecting a robust post-pandemic recovery.

"Foreign inflows have become the main incremental fund for China's stock market since November, playing an important role shaping A-share performance and style," said analysts at Industrial Securities, who expect around 300 billion yuan of net inflows in 2023. ($1 = 6.7795 Chinese yuan renminbi) (Reporting by Jason Xue and Brenda Goh; Additional reporting by Samuel Shen; Editing by Vidya Ranganathan)

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