Singapore’s UOB sees Chinese stocks outperforming in the second half as Beijing moves to support economy
- MSCI China Index fell 10 per cent in July, its worst monthly performance in a year
- ‘Positive vibes’ from Beijing indicate more support on the infrastructure and lending fronts, says Abel Lim of UOB
Some fund managers are turning bullish on Chinese equities amid expectations that Beijing will implement more policy support and open liquidity to prop up the slowing economy, which will have a “multiplier effect on boosting consumption”.
China is one of the few bright spots in the world now, with low inflation making room for more liquidity and policy support a key reason for turning overweight on Chinese stocks from neutral, said Abel Lim, head of wealth management advisory and strategy at Singapore’s United Overseas Bank (UOB).
China’s consumer price index rose 2.7 per cent in July from a year earlier, against Beijing’s target of around 3 per cent for the full year. The central bank this week lowered its policy rates for the first time since January, while the Federal Reserve has raised by 225 basis points since March to control prices at a four-decade high.
“Because of the more positive vibes that the central government is putting up today, that suggests that the second half of 2022 is likely to feature more goodies from the government, particularly on the infrastructure support front and on the lending front by the banks,” Lim said in an interview on Monday.
Most Chinese stocks remain close to oversold, while many of the risks are known, said Lim, adding that the markets in the “second half will outperform the first half given the possibility of policy support”.
