After a rough start to the week, Chinese markets are back in the spotlight. China’s blue-chip CSI 300 index soared more than 10% at the open on Tuesday on expectations of further measures to boost the economy after the seven-day Golden Week holiday. However, gains cooled after China’s National Development and Reform Commission delayed announcing any new major stimulus package, disappointing investors. The CSI 300 Index closed up 5.93% on Tuesday, while Hong Kong’s Hang Seng Index closed down 9.4%. On the eve of the holidays, the Chinese government launched a series of stimulus measures, including cutting interest rates, reducing bank cash reserve requirements, easing home purchase regulations and providing liquidity support for the stock market. Markets cheered the news, with Wall Street strategists taking a more positive view on China, which until recently was considered a contrarian trade. As investors consider whether and how to invest in China, two experts share their views on the market. From “Neutral” to “Overweight” For Chen Jingwei, chief investment strategist at wealth management firm Wrise Private Singapore, the first signs of stimulus are enough to turn bullish on China. “Given the scope of these interventions, we have revised our outlook (on the country) to reflect our new confidence in the region’s recovery potential,” he told CNBC Pro. The wealth manager had previously been neutral on China , whose companies serve ultra-high-net-worth individuals in Asia, the Middle East and Europe. He said: “We believe the scale and focus of these measures, especially targeted liquidity injections, can solve the key problem of insufficient domestic capital inflows into China’s stock markets. We expect that market participation will increase, which will boost the stock market performance. While Chen is optimistic about the future, he said his investment approach is selective and is looking for opportunities with “industry leaders with strong fundamentals and solid capital return strategies, especially in electric vehicles and Internet sector. He explained that companies in these industries have shown upward earnings revisions and are capable of outperforming the market in the short term. His top picks include automaker BYD and technology giant Tencent Holdings in other industries. These include utilities, energy, telecoms and financials. All of these companies have “higher earnings visibility and defensive dividend yields” and will benefit from the lower interest rate environment and ongoing state-owned enterprise reforms, he added. Benefit. “China is no longer cheap” Lorraine Tan, head of Asia equity research at Morningstar, is more cautious about the future. Chinese stocks have often been described as “cheap” over the past year, but markets in Hong Kong and mainland China “have rebounded to share price levels that no longer offer attractive upside and risk of disappointment,” Tan said. “Currently, the China market is no longer cheap. In the past two weeks, our China coverage has dropped from a 21% discount to fair value estimates to 4% now. Because most people are underestimating the China market.” With limited selling, buying The market impact caused significant price fluctuations,” Tan wrote in an Oct. 8 report. “We think there are still buying opportunities, but as the risk/reward ratio rises, we will be highly selective in our selections,” Tan added. She bets on select companies in sectors such as cyclical consumer, defense and communication services, These companies still have “more attractive discounts.” The stocks she focuses on include “higher quality, strong brands” such as fast-food chain Yum China Holdings and property developer China Resources Land. An economic moat refers to a company’s competitive advantage. —CNBC’s Lim Hui Jie contributed to this report.
Is now the time to invest in China? Two professionals share their perspectives | Real Time Headlines
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