Does foreign equity investment impact the spillover effect of industries in China?

This study aims to systematically investigate the impact of foreign equity investment on the spillover across industries in China, both in terms of the contagion path and persistence of shocks and the performance during the COVID-19 pandemic. We use daily data on returns covering 2014 to 2022 and apply linear and non-linear causality tests and spillover framework. Our findings show that the two proxies of foreign investment, net buying and Δ Net Buying, significantly shock the spillover across 11 industry indexes of China's stock market, particularly the spillover output and long-term spillover received of sectors. During the COVID-19 pandemic, international investors are bullish on China's economy reflected in the continuous inflow of northbound trading, and the short-run influence on China's stock market is weakened, while the long-run impact remains. Moreover, financial networks suggest that the path of movement international capital movement to accomplish overall contagion through shock in certain specific industries. Overall, this study evidence that the northbound trading generally overlooked by researchers is indeed an important channel of financial contagion to China's stock market.

What impacts foreign capital flows to China's stock markets? Evidence from financial risk spillover networks

This study investigates the spillover effects between foreign capital in China's stock market and 11 other financial assets (e.g., major stock markets, financial products, and interest rates). Employing the Diebold–Yilmaz framework (VAR– and QVAR based) and a complex network approach, we found that China's stock market foreign capital is significantly connected to international markets;the U.S., Hong Kong, and the U.K. were the top net risk transmitters. Moreover, money flows were subject to global instability and emergencies, including Brexit, the Sino-US trade war, and the COVID-19 pandemic. The operation of the Northward Fund is sometimes ahead of many developed markets, indicating that capital movement was somehow "Smart Money”. Our study provides a new idea for risk warning and systematic risk prevention.

MULTIFRACTAL ANALYSIS OF COVID-19’S IMPACT ON CHINA’S STOCK MARKET

To examine the overall properties of the China’s stock market affected by the COVID-19 pandemic, we provide a comprehensive study of the multifractal properties across stock market sectors applying multifractal detrended fluctuation analysis (MF-DFA). We focus on intra-day 5min transaction data of 10 sectors in the Shanghai Stock Exchange, and the time-depended MF-DFA was also used to explore the dynamical evolution of the multifractal characterize for the overall period. We found that all sectors exhibit stronger multifractality and the weak market efficiency during the period of COVID-19, MHII performed best with the lower multifractal properties and higher market efficiency, three worse performers were ITII, TBII, and EII. While ITII, TBII, MCII, and UII were the four fastest recovering sectors from the gloom of the epidemic, with the plummeted multifractal intensity and the significantly increased market efficiency for the post-phase of the pandemic. The results based on the time-varying MF-DFA confirmed that the Chinese stock market is not only affected by the COVID-19 epidemic domestic but the impact of the US stock market crash in March was also transmitted to it, causing those industries sensitive to the market to fluctuate subsequently.