Overseas capital is buying more yuan-denominated A-shares in China, with investment confidence boosted by a slew of stimulus measures unveiled recently to stabilize the economy while the COVID-19 resurgence waned.

Amid recent market rebounds, China's bourses in Shanghai and Shenzhen have seen net inflows of funds through "northbound trading," or money invested from Hong Kong via the stock connect programs, for seven consecutive trading days to Tuesday.

Entering 2022, China has seen sporadic resurgences of COVID-19 in several parts of the country, with the most severe hitting the economic and financial hub of Shanghai starting in March. Many investors began to worry that China's economic recovery may hit major bumps.

The worries damped investor confidence. In March alone, the benchmark Shanghai Composite Index fell over 6 percent while the Shenzhen Component Index dropped nearly 10 percent.

The net outflows of funds through "northbound trading" totaled 45 billion yuan (about 6.8 billion U.S. dollars) in March, the third-largest monthly net outflows since the launch of the stock connect programs between Hong Kong and the Chinese mainland.

Facing the epidemic resurgence, Chinese governments at various levels have rolled out a slew of stimulus measures to reduce the shocks to the economy.

The State Council, or the cabinet, unveiled a package of policy measures to further stabilize the economy and better coordinate epidemic control and economic development on May 31.

The package includes 33 measures covering fiscal and financial policies and policies on investment, consumption, food and energy security, industrial and supply chains, and people's livelihoods.

As of June 1, Shanghai has mostly returned to regular production and life after two months of closed-off management to contain the COVID-19 resurgence.

As investor confidence got boosted by the targeted measures to prop up the economy, China's stock markets have thus recovered some lost ground in the past more than one month.

The Shanghai Composite Index closed at 3,241.76 points Tuesday, recovering over 13 percent from the intraday lowest within this year on April 27.

The northbound funds reported net inflows again in April and May and continued to increase holdings of A-shares. The cumulative net inflow in the four trading days to Tuesday totaled 20.3 billion yuan, 1.28 times the total amount in May.

More detailed and forceful stimulus measures will help China stabilize the economy and boost investor confidence, said Kinger Lau, chief China strategist for Goldman Sachs Research.

The policy signals, current valuation levels, and continued capital market reforms are the three major factors behind the recent rebound of the A-shares, Lau noted.

Wang Tao, an economist from UBS, said China's moves to coordinate epidemic control and social and economic development acted as a stabilizer for the world, particularly the emerging markets.

The valuation of the A-share market may have hit bottom given the sustained strong government policy support since May and relatively loose liquidity conditions, said a recent research note released by UBS.

Several well-known institutions have recently expressed their optimism about the medium and long-term prospects of the Chinese stock market.

The A-share market is still attractive to global investors in the long term, considering the economic recovery on policy support while the epidemic waned, as well as the stabilizing Renminbi exchange rate and relatively low valuations compared with overseas markets, said Citibank analysts.

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