The world’s top fund managers are mostly bullish on Chinese stocks next year, predicting that equities will continue to rally as strict COVID-19 measures are relaxed.
About 60 percent of respondents in a Bloomberg News survey recommended buying the country’s stocks, while 31 percent said they are a sell.
On top of optimism about China’s reopening, easing geopolitical tensions and cheap valuations are reasons to buy, according to the informal survey of 134 fund managers.
Photo: AP
“It does seem like there is an evolution from China in terms of their COVID approach,” said Ben Powell, APAC chief investment strategist, BlackRock Investment Institute.
He sees upside potential for earnings in China, and downside potential in the US and Europe.
After a rough year, Chinese stocks are ending this year with a big rebound. The Hang Seng China Enterprises Index stormed into a bull market last month, and is up 38 percent since its October low.
However, the gauge is still down 44 percent from its peak in February last year.
Investors in the survey also see China’s stocks as attractively valued. The MSCI China Index is trading at 11 times forward earnings, below the average level for the past five years.
While the 12-month earnings forecast for the MSCI China Index has risen in the past month, it is still well below pre-pandemic levels, Bloomberg data show.
The bullishness on China was echoed this week by JPMorgan Chase & Co strategist Marko Kolanovic, who said in his outlook for next year that he is still positive on the country amid favorable monetary conditions and an eventual full reopening.
Still, not all survey participants were so positive.
Fund managers said the biggest risks for Chinese equities are uncertainty about government policy and regulations.
“Headwinds remain, on the geopolitical front, on the reopening from ‘zero COVID’ policies and on the regulatory environment,” said Fabiana Fedeli, CIO for equities, multiasset and sustainabilty at M&G Investments.
While there are opportunities in China, investors need to be selective, she said.
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