The comment by Gergely Majoros, member of Carmignac’s Investment Committee
The beginning of the 2022 for those who invest inChinese equity it was a lot disappointing as much as all of 2021, especially for investors of the so-called New Economy Chinese and especially in comparison to the performance of its US counterparts.
The uncertainty relating to regulatory restrictions for the technology sectorthe reorganization of Evergrandethe delisting give her American bags and the economic slowdown these are all factors that have contributed to increasing investors’ willingness to exit the Chinese market. More recently, the lack of clarity on the Chinese government’s position regarding the Russian invasion of Ukraine, which suggests that the sell-off of the Russian market can also spread to Chinese marketshe probably pushed the investors more immovable internationals ad get out of these markets.
The current recovery positive, triggered by the vice premier’s encouraging speech He He last week, summons a déjà-vu which brings us back to 2016, a year whose start was characterized by significant corrections in Chinese stocks, to then have it recorded positive performance for these equity markets towards the end of the year, after hitting lows.
But what if the negative factors mentioned earlier gradually disappeared? The currently attractive valuations of some specific segments of these markets would constitute a good entry point for investors and, above all, the launch of a program of more significant economic stimuli, necessary to reach the “usual” growth target of GDP of 5%it could also act as a driver for the market.
On March 16, the deputy premier Liu He, at the head of the meeting of the Financial Stability and Development Committee, he surprisingly dealt with all the fundamental market issues mentioned above in a very convincing way. As for the future regulation of Chinese internet platforms, he announced a regulatory push towards a “traffic light regime”And the intention of the authorities to facilitate the healthy development of these companies through transparent regulation.
He also addressed the issues of fragmented Chinese real estate sector, best represented by Evergrande, noting that credit support for the industry could be stepped up, especially for construction companies. Furthermore, he also pointed out that i policymaker Chinese companies will continue to support overseas listings and propose a concrete plan to overcome the current problem of US authorities’ review of audit documents, thus easing fears of a disorderly delisting of Chinese companies to the US.
Last but not least, he reiterated that the politicians’ intention to guarantee the maintenance of economic growthwithin a reasonable range, providing “effective responses” on monetary policy to ensure that loan growth remains appropriate.
As usual, it is necessary that these statements are followed by concrete measures to ensure that international investors return to invest significantly in these markets. However, this strong political signal could represent an inflection point, or at least a “Beijing put” on Chinese equity markets for the future.
Although the question of the location of the China on Ukraine is still open, as is, for obvious reasons, that of Taiwanthere are several reasons to estimate a positive outlook for Chinese equities in 2022. As usual, for investors the timing It will be a fundamental factor but, as we all know, waiting for the stars to align before acting is almost never a good strategy.
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