Chinese stock valuations ‘attractive,’ don’t expect quick rebound
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According to Kelvin Tay, UBS Global Wealth Management, Chinese stocks are “very, very appealing” at the moment, but they will not see an immediate turnaround over the coming months.
China’s price is low, I believe. China’s performance this year has been relative to the American and European indices. According to Tay, UBS Global Wealth Management’s regional chief investment officer, “SquawkBox Asia,” Tuesday.
China’s CSI 300 index tracks mainland stocks and has dropped nearly 5% since Tuesday’s close. The CSI 300 index in Hong Kong is where most of China’s top tech companies are listed. Hang Seng indexMore than 14% has been lost in that same period.
Comparatively, S&P 500 on Wall Street rose to a new record close — its 69th in 2021 — as recently as Monday. The pan-European was the top news in Europe. Stoxx 600As at Tuesday closing, 2021 has seen a more than 22% increase.
Tay stated, “China certainly seems very, very attractive from a perspective of valuations and positioning.”
The market is weighing on the property sector
However, he warned that China’s market will not recover within the next three month due to “distinct shortage of catalysts”. The need to ensure that China has a stable property market is cited by him.
This year, investors have mostly avoided the Chinese real-estate sector due to concerns about defaults and a credit crunch. In December, debt-laden property developer China Evergrande Group slipped into default after failing to confirm payment of a debt obligation.
Tay indicated that while we think things have turned around, it is just that on the issuers and on the Chinese high yield front you will likely still get news.
These developments could hurt sentiment.
Looking ahead, Tay said Hong Kong-listed Chinese companies — which were “beaten down really, really badly” this year — are “likely to be far more attractive” as compared with their peers on the mainland.
According to the chief investment officer, although we believe there has been a lot of policy risk in tightening over time, most of it seems gone. The chief investment officer explained that the future will see fine tuning of existing measures, and not a complete overhaul. what we had in the tuition industry in July this year.”
Weakening expectations for the yuan
The expectation of a decline in the yuan’s value next year is another factor which could give Hong Kong-listed Chinese stocks some relief.
Tay noted that “The strength of the renminbi is very, very high.” The government actually stated on several occasions, “The outperformance of Renminbi vis-a-vis other currencies in the past six months has been a concern.”
As per Wednesday afternoon Asia trade hours, onshore yuanThe dollar is expected to strengthen by more than 2 percent in 2021. However, its overseas counterpart has seen a nearly 2-fold increase against the greenback.
Tay indicated that the “we expect” renminbi will “actually weaken by 2022,” adding that it would likely have an impact on the performance of Chinese mainland stocks due to their “very tight” relationship with the yuan.
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