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.
