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Experts: Equities set to rebound from bear grip

By SHI JING in Shanghai | China Daily | Updated: 2022-05-25 09:53
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Marcos Troyjo

Although the A shares fell on Tuesday, the market will likely recover soon on the back of supportive policies and the country's long-term economic growth momentum, experts from leading international financial institutions said.

On Tuesday, the benchmark Shanghai Composite Index fell 2.41 percent, while the Shenzhen Component Index closed 3.34 percent lower. The Nasdaq-style ChiNext in Shenzhen shed 3.82 percent.

Such volatility was anticipated by Morgan Stanley analysts as the A-share market is, in their words, going through "the bumpy final leg "of a bear market. Investor patience is called for now as market volatility may remain elevated in the short term, they said.

But the short-term fluctuation has not affected Morgan Stanley's preference for A shares, given that a policy easing cycle is said to be forming in China.

Investors should focus on oversold high-quality names and companies with share buyback plans. Exposure to materials and industrial companies, which are likely to be boosted by China's stimulative infrastructure policies, could prove profitable in the medium to long-term, said Laura Wang, chief China equity strategist at Morgan Stanley.

Experts from China International Fund Management Co Ltd, which was jointly set up by Shanghai International Trust & Investment and JP Morgan Asset Management, wrote in a note on Tuesday that downbeat market sentiment has been waning as the latest COVID-19 outbreak is coming under better control and efforts to facilitate production resumption are proceeding in an orderly way.

Liquidity is reasonably ample, so investors should look at sectors like banks, infrastructure, real estate, furniture and home appliances in the second half of the year, market mavens said.

Ethan Wang, head of investment strategy for wealth management at Standard Chartered China, said the A-share market is likely to outperform other markets this year, given the low valuations in China and the stimulative monetary and infrastructure policies slated to be implemented in the near term.

Eugene Qian, chairman of UBS Securities Co Ltd, said investment in China assets is no longer an option but a must, especially for large institutional investors that track the world's major indexes.

The ongoing structural reforms in China put more stress on development quality than on speed, which will translate into a continued economic driving force, said Marcos Troyjo, president of New Development Bank. He was addressing a seminar on Monday at the ongoing World Economic Forum in Davos, Switzerland. China's GDP growth, he said, will likely come in at around 5 percent this year.

Given the unchanged or even heightened level of openness in China, as well as the value that China continues to bring to the global supply chains, the country will remain "one of the top destinations for foreign direct investment for a long time to come", he said.

Agreed Jerry Zhang, CEO of Standard Chartered Bank (China). China's long-term development prospects offer "enormous opportunities", she said.

Based on the conviction that China's high-level opening-up will continue, and given the Regional Comprehensive Economic Partnership agreement that took effect on Jan 1, Standard Chartered Group announced in February it will invest $300 million in its China-related business in the next three years.

Jiang Xueqing contributed to this story.

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