(Bloomberg) -- Foreigners are returning to China’s stock market with a vengeance, snapping up more shares in January alone than they did for the whole of 2022.

Offshore funds have added a net 141.2 billion yuan ($20.9 billion) worth of stocks listed in Shanghai and Shenzhen through trading links with Hong Kong this month, even with a week-long holiday trading break. That’s more than 50% above the previous monthly record, according to Bloomberg-compiled data going back to 2017. 

The fervor has helped drive the CSI 300 Index, a benchmark for mainland stocks, to the brink of a bull market as traders returned from the Lunar New Year holiday this week. Analysts expect foreign buying to propel an outperformance in mainland shares in the coming months, a catch-up to the massive rally seen in overseas Chinese stocks since the start of November. 

Solid holiday spending data will “continue to be a theme offering a shot in the arm throughout the first quarter and enhance investor confidence toward a recovery,” Kaiyuan Securities analyst Zhang Chi wrote in a note. 

The buying streak continued into Tuesday, even as the CSI 300 fell 1.1%. The benchmark has risen 18% over the past three months as sentiment improved following Beijing’s Covid policy pivot and moves to support growth. While a world-beating feat by itself, the gains have still trailed the 49% surge in the Hang Seng China Enterprises Index, which tracks Chinese firms traded in Hong Kong. 

The months-long rally has led to some investors booking in gains — as illustrated Monday and again on Tuesday when the CSI 300 pulled back from the verge of a bull market.    

However, few doubt that Chinese stocks will shine this year. There’s been a flurry of forecast upgrades for the nation’s economy, with Goldman Sachs Group Inc. seeing a 5.5% expansion, even as most developed economies grapple with the fear of a recession. 

There’s still room for further purchases. Hedge fund investors have boosted holdings of Chinese stocks for three straight months but positioning hasn’t yet caught up with the improving investment, Goldman strategists wrote Jan. 29. A research by Morgan Stanley earlier this month also showed US funds remain underweight Chinese stocks.

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And as the economy recovers, earnings growth will likely follow and add impetus to the stock market. 

“China’s earnings-per-share forecasts have not incorporated any of the upside in revisions,” Jefferies Financial Group Inc. strategists including Sean Darby wrote in a Jan. 30 note. “There will be a slew of upgrades that will force investors to chase the market.”

(Updates with Tuesday market moves throughout)

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