Six reasons to revisit Chinese equities

Outflows from Chinese equities have been persistent through 2021 and much of 2022. Investors have struggled with near-term dynamics from COVID, a weak real estate market and fresh regulations. This has driven valuations to their cheapest level since 2019. For long-term investors, portfolio manager Wenchang Ma sees six reasons why you should revisit the investment case for Chinese equities.

22 Aug 2022

18 minutes

Wenchang Ma
Outflows from Chinese equities have been persistent through 2021 and much of 2022. Investors have struggled with near-term dynamics from COVID, a weak real estate market and fresh regulations. This has driven valuations to their cheapest level since 2019. For long-term investors, portfolio manager Wenchang Ma sees six reasons why you should revisit the investment case for Chinese equities.

The fast view

  • China’s investment outlook has struggled against the backdrop of a weak real estate market, the risk of spill-over sanctions from Russia, the recent domestic COVID resurgence and the subsequent rolling lockdowns.
  • As a result, further earnings downgrades may be needed to reflect the economic costs of the pandemic.
  • Yet the long-term structural support for China’s economic and equity market growth remains intact, with the country’s policymakers widely expected to step up policy stimulus, signalling that economic growth will be prioritised.
  • With China’s very low representation in global equity indices, current valuations reflect an elevated equity risk premium that looks attractive for long-term equity investors.
  • This viewpoint looks at six reasons to revisit the investment case for China equities.

 

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Authored by

Wenchang Ma
Co-Portfolio Manager, All China Equity

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