I believe that investors are well aware that the factors that have influenced the decline in the Chinese stock market in the last period are caused by 1. The entry of the Chinese government into the big tech companies 2. Conflict with the US 3. Zero Covid policy and 4. Problems in the real estate sector All of this has contributed to the low growth rate of the Chinese economy.
From IMF (Source FMI Regional Economic Outlook Report for Asia and the Pacific) Growth this year is expected at 3.2%, the second lowest growth rate since 1977. The recovery should also be called into question by COVID policy and housing problems.
Investors are also keeping an eye on the 20th General Assembly of the Communist Party of China, which results in disappointing foreign investors, especially economic issues and the Zero Covid policy that were not discussed in a relaxed manner as expected and
IncludedThe appointment of a new Politburo Standing Committee by academics is in favor of increasing the powers of President Xi. Absolutely Jinping Because the four newly appointed committees are all former subordinates who have worked with President Xi. Jinping first
As a result, there may be a lack of balance of power, but on the other hand, the Chinese people see it as a reduction in political conflict and better reforms and political decisions.President Jinping’s color announced a strategic plan for the next five years called “Chinese modernization.” It is not precisely detailed, but it is still expected to emphasize the approach to common prosperity, which is different from the Western capitalist world.
This will reduce inequality in the country and still want to raise the level of people to have higher standards on a sustainable basis. After the meeting, the Chinese stock market, especially large tech stocks and US-listed Chinese stocks (Chinese ADR), fell more than 6%. Foreign outflows were the highest of the year (Source Mr. Richard Tang, CFA, Bank of Julius Baer Hong Kong).
Julius Bear analysts also estimate that China’s equity markets will remain volatile in the short term. As a result, we still maintain a cautious view on investing in the Chinese equity market. The Mainland China Stock Market Index or A-Share is expected to outperform the Hong Kong Stock Exchange or H-Share China Stock Market in the future because the A-Share market will have better growth (source Mr. Richard Tang, CFA, Bank of Julius Baer Hong Kong)
However, we expectChinese equity indices as a whole will move in a wide range (Fat and Flat trading range) Investors should choose sectors or stocks (Alpha versus Beta). 1. Groups benefiting from government policies around the world, not just in China. This is an environmental policy. With a policy to reduce carbon dioxide emissions using clean energy (China’s green ambition), China currently accounts for nearly 90% of world solar panel production and 76% of global production of electric vehicle batteries. .
However, while these stocks have also declined in the past due to Chinese and global equity markets, we still see them as a long-term investment opportunity (source Julius Baer Research Focus on Cleaner China. Making China’s Green Ambition a Reality, 12 October 2022 ) 2. Domestic conglomerates benefiting from domestic consumption 3. Smart manufacturing that the Chinese authorities want to develop modern technology without relying on overseas
However, the problem to look at in the next period is 1. The announcement of the third quarter financial statements of large Chinese technology companies which will be announced gradually in mid-November.that analysts also expected the impact of the Zero Covid measures in the last quarter and 2. Zero Covid policy problems The disappointment in the past has caused investors to lower their expectations a lot, giving them the opportunity to come back with a positive surprise.
3. Problems in the real estate sector, although the government has tried to find measures to solve the problems, but the situation has not improved, making it unable to gain trust for both consumers and investors. However, investing is risky, those interested in investing should contact their investment advisor to inquire and receive more information to study the details and find the right investment for you.
