(Bloomberg) -- Chinese stocks finally snapped a six-month streak of outflows in February but there are plenty of doubts over the sustainability of the rebound given the role played by state-fund buying.

Overseas investors snapped up a net 60.7 billion yuan ($8.4 billion) of onshore equities last month via links between Hong Kong and mainland stock exchanges. That halted the record 201 billion yuan of outflows seen from August through January. Chinese policymakers are understood to use the offshore accounts of state-backed funds to help boost the market.

One sign the purchases may have been influenced by official market-rescue efforts was that three of the four-largest targets of the inflows in February were bank shares. The nation’s biggest banks were the main focus of a previous round of buying from China’s sovereign wealth fund.

“It’s highly likely that to some degree there have been market stabilization forces in the flows through the links with Hong Kong,” said Yu Yingdong, fund managing director at Shenzhen Cowin Capital Management Co. The inflows into financial firms suggest official involvement “as state funds often acknowledged the value in bank shares, but the indexes may have now reached the state fund’s targeted levels,” he said.

China’s stocks have been pummeled over the past three years as a faltering economy and property crisis fueled a selloff that saw the market lose almost $6 trillion in capitalization from its highs in 2021. As the turmoil deepened in recent months, the authorities have stepped up measures to help bolster sentiment, including restricting short selling and cracking down on high-speed trading.

Policymakers in January were considering mobilizing about 2 trillion yuan to buy onshore equities directly through the Hong Kong exchange link, Bloomberg reported at the time. Onshore traders had been scrutinizing the northbound flows for months, so any signs of increased buying through this channel would have been a relatively powerful way for the authorities to bolster sentiment.

The biggest recipient of the inflows in February was alcoholic-beverage maker Kweichow Moutai Co. with 5.2 billion yuan, according to data compiled by Bloomberg as of Feb. 23. The next three largest were all financial firms, namely China Merchants Bank Co., Ping An Insurance Group Co. and Industrial & Commercial Bank of China Ltd.

Another avenue the authorities have used to bolster the market has been purchases of exchange-traded funds by state wealth fund Central Huijin Investment Ltd. Inflows into some of the largest ETFs tracking China’s main benchmark indexes look to have been correlated with northbound flows this year, suggesting state buying may have influenced northbound flows in this way.

It remains unclear though whether any of these trades where done via the northbound link, and it’s therefore difficult to disentangle the amount of organic purchases by overseas investors.

State-backed funds funneled more than 410 billion yuan into onshore shares this year through Feb. 23 in a bid to prop up the market, according to estimates made by UBS Group AG. The Swiss bank said it based its calculations on “excess” transactions of 54 Chinese exchange-traded funds.

Many of the most heavily traded stocks in February were the same as those in January. Bank of Jiangsu Co., China Merchants Bank and Industrial Bank Co. all made the list of the most purchased shares in both months. Large-cap tech companies Zhongji Innolight Co. and Beijing Kingsoft Office Software Inc. fell off the list in February, suggesting state forces — with a preference for banking shares — had a greater presence that month.

Still, some of the buying of large financial firms may just have been a function of haven demand. Investors could have sought shelter in stocks with relatively high dividend yields, a group that contains many banks and insurers. A gauge of Shanghai-listed shares with high and stable cash dividends rose as much as 14% this year.

“Whoever is buying stocks both offshore and onshore are focusing on high dividend plays,” said Ken Wong, an Asia equity portfolio strategist at Eastspring Investments Hong Kong Ltd. “This does make sense because those stocks obviously are still trading substantially below their intrinsic value.”

--With assistance from Sangmi Cha.

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