Reasons to stay positive on China equity

Financial markets in China had one of their worst runs in 2022 due to the uncertainty from regulatory scrutiny, the real estate crisis and the zero-Covid rules. However, the recent turnaround in Beijing’s policies has brought China equity back in focus, and SYZ Group believes there are several reasons to remain optimistic about Chinese stocks.

“We turned positive on Chinese equities following the Communist Party Congress in late October. At the time, we believed that the market had interpreted the implications of this historic congress far too pessimistically. Since then, other positive developments have fueled our positive investment outlook on Chinese stocks,” writes Christopher Kirsch, Investment Advisor, SYZ Group.

The Swiss banking group and investment manager lists 12 key reasons why investors should consider China equity. Back in November, President Xi Jinping’s government decided to take a U-turn on its zero-Covid policy and set China on a path of reopening. SYZ believes this will lead to a gradual return to normal for Chinese economic activity.

During the lockdowns in China and due to the crisis in the real estate sector, households have accumulated considerable savings. This could stimulate spending and improve employment and growth.

The strong rebound is likely to help China reach a 6% GDP growth in 2023. Meanwhile, the low inflation figure compared to Europe and the US has allowed the People’s Bank of China to have much more flexibility.

“The Chinese government has recently adopted more accommodating fiscal and monetary policies to support the economic recovery through household consumption and small business activity,” as per Charles-Henry Monchau, Chief Investment Officer, SYZ Group, explaining that China is one of the few economies with a restrictive monetary policy.

Additionally, making a case for China equity, SYZ Group says the real estate market is improving, regulatory scrutiny has reduced, and the delisting of American Depository Shares seems to be on hold for now, among other things.

View the complete insight here.