Tom Westbrook

SINGAPORE (Reuters), HSBC’s European bank is bullish on Chinese shares, arguing that the worst regulatory storm has passed. Beijing also plans to provide support for slowing growth.

Tuesday’s announcement by HSBC that its recommendation regarding Chinese equities had been upgraded to “overweight”, from “neutral” was part of a growing group of investors who feel the tide is changing.

In a report by HSBC, Herald van der Linde (NYSE :), the head of Asia-Pacific equity strategies was the author.

China is experiencing slow growth and stronger dollars are not good news for China’s stock markets. However, this is now known and priced in”, the report stated.

As a result of the crackdowns on tech firms’ property borrowing behaviour, MSCI’s China index fell by 12% in this year’s MSCI world stocks index. Share prices have been hammered.

HSBC, one of a handful in the financial industry calling for a sale. BlackRock, an asset manager (NYSE:), stated that it had been dipping its fingers back into Chinese equities a month prior.

Citi Private Bank strategists also stated Monday that they are slightly overweight in Chinese Equities. Meanwhile, Goldman Sachs analysts (NYSE:) revealed a portfolio called “Common Prosperity”, which they claimed was protected from regulatory risk.

According to HSBC analysts, “We expect Beijing will introduce more targeted easing actions in the coming months as growth slows down.”

“Regulations, which have harmed the China Internet sector so severely this year, tend to appear in cycles… The focus eventually shifts towards growth and stability heading into next year’s twice-as-decade Party Congress.”

HSBC cited the beaten down real estate sector for being particularly appealing over the long term. However, concerns about fallingout from the troubles at China Evergrande could weigh on the prices for a while.

There are “buy” recommendations for developers China Resources Land Holdings, Longfor Group Holdings or Shimao.

Evergrande stated that it has resumed work on over 10 projects on October 24, after appearing to avoid default last week with a late bond coupon payment.