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BlackRock ditches bullish call on Chinese stocks and bonds as Covid lockdowns take growing toll on economy
- China’s draconian Covid restrictions have resulted in lockdowns in Shanghai and other cities that are exerting a major drag on the economy
- The MSCI China Index has lost 28 per cent since the beginning of October, compared with a decline of 11 per cent in MSCI’s global benchmark
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BlackRock jettisoned its bullish stance on China as Covid lockdowns jeopardise the nation’s economic growth, triggering a steep drop in local stock prices.
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The firm had held a “modest overweight” view on Chinese assets as attractive valuations made up for the risks, BlackRock Investment Institute strategists including Jean Boivin and Wei Li wrote in a note on Monday. But the firm is now recommending a neutral stance on Chinese stocks and bonds as the response to the pandemic takes a growing toll.
“The rapidly worsening outlook for China’s growth on widespread lockdowns to curtail a Covid spike has changed this,” they wrote. “Lockdowns are set to curtail economic activity. China’s policymakers have heralded easing to prevent a growth slowdown – but have yet to fully act.”
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China’s draconian Covid restrictions have resulted in lockdowns in Shanghai and other cities that are exerting a major drag on the economy, the world’s second largest. Concern over the nation’s outlook sent the yuan plunging more than 1 per cent against the US dollar in China on Monday while a Bloomberg gauge of major stocks tumbled almost 3 per cent.
Global investors have also pulled out of China’s capital markets since Russia’s invasion of Ukraine, worried that Beijing may become drawn into the economic sanctions battle that the US and Europe is waging against Russian President Vladimir Putin’s administration.
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