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Wednesday, May 29, 2024

Profiting from the turnaround in Chinese stocks

The latest news on Chinese markets is showing some signs of positivity, which is getting international investors excited. After a rough start to the year, Chinese stocks have seen four consecutive days of gains, which is a rare occurrence. This upswing seems to have been supported by a combination of official statements, monetary policy changes, and media reports. However, many are still unsure about whether this is a sustainable trend or not.

David Chao, a global market strategist, emphasizes that having an active strategy is crucial when it comes to investing in China. He mentioned that focusing on industries that receive policy support, such as high-tech manufacturing, robotics, and alternative energies, is key in navigating the market.

Recent statements from the People’s Bank of China (PBOC) suggest that they are willing to do more to support the economy, including a bigger-than-expected cut to the reserve requirement ratio. This willingness to support struggling developers and the economy as a whole is a positive sign, according to experts.

Despite these positive signs, there is still a considerable amount of pessimism in the market, especially among retail investors. However, there are pockets of high-growth areas, particularly in manufacturing and infrastructure. Analysts have revealed their top picks in these categories, and some of the names include CRRC, Weichai Power, and Inovance. These companies are receiving investment interest due to their involvement in high-end manufacturing, an area that China is looking to boost.

While there have been positive developments in the Chinese market, there is still some skepticism among institutional investors. Many international funds have been reducing their exposure to mainland China, which has led to significant outflows from Asian stocks.

In light of this institutional uncertainty, some are looking to European proxies to gain exposure to the market recovery in China. European companies like LVMH, adidas, and Kone have been cited as potential investment options with exposure to the Chinese market.

Overall, there are signs of recovery and growth in the Chinese market, but there is still a level of caution among investors. The need for a more sustained recovery and clear government support is essential if China wants to attract more interest from institutional investors. So, while things are looking up, it remains to be seen whether this positivity will turn into a long-term trend.

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