The reopening of China’s economy has reignited widespread interest in foreign investment, which strategists expect will benefit the Chinese market and investors this year and beyond. Strategists believe the Chinese market can easily achieve double-digit profits this year. Hong Kong’s Hang Seng Index is up just under 10% year-to-date, while mainland markets such as Shanghai are up about half that. But strategists warn that the China story may not be all that is hoped for due to the continued spread of Covid and the difficulty of re-engaging the economy with the world. “My view remains that China is trade, not investment,” said Jimmy Chan, chief investment officer at the Global Family Office. Given that, it is not surprising that more people are turning their attention to China, people want to find positive catalysts around the world.” There is good potential for investments outside the United States, given the potential for declines. The iShares MSCI Emerging Markets ETF, which includes Chinese companies, is up 8.5% year-to-date, while the S&P 500 is up just under 2% in early 2023. Based on last month’s outlook, international markets are now trading at a 29% valuation discount to their US counterparts. This is his widest level in over 15 years,” said Ben Kirby, co-head of investments at Thornburg Asset Management. “We recommend long-term investors take advantage of current cheap valuations and diversifying portfolios outside the US.” I expected it to spread to countries such as markets. Chinese Vice Premier Liu He, for example, spoke at the World Economic Forum in Davos this week and met separately with US Treasury Secretary Janet Yellen. Further meetings were promised. Ed Mills, a Washington policy strategist at Raymond James, said the goal of improving U.S.-China relations has become clearer since the G20 meeting in July. Secretary of State Antony Brinken will reportedly visit Beijing on February 5 and he will meet with China’s Foreign Minister Qin Gang on February 6. He said. Mills said Chinese President Xi Jinping and President Joe Biden could meet in the fourth quarter. Beyond trade, when former House Speaker Nancy Pelosi visited Taiwan in August, she said relations between China and the United States were particularly troubling, and China had warned her not to visit. There was also a new ban on Taiwanese products, and military exercises were held near Taiwan. China says Taiwan is part of Greater China, and the United States has repeatedly warned against annexing it. “Some of the tension has cooled. The question is, will it ease further from here, or will it heat up again,” Mills said. “I don’t think we have an answer to that yet.” China’s Ministry of Commerce said Liu and Yellen discussed US economic and technology policies. Last fall, the US restricted US companies and individuals from working with Chinese partners on high-end semiconductors. The move comes after the Trump administration imposed certain restrictions on her SMIC and Huawei. Also, the Trump administration’s tariffs on many Chinese products are still in effect. Reopening is a tipping point Her post-lockdown China’s resurgence could spur more trade and economic activity around the world. Demand in China will also increase. Strategists point to potential gains for other countries in the region that trade with China, such as South Korea and Australia. A Barclays equity strategist said, “China’s reopening is arguably a turning point, but there remains reason to be cautious.” This includes a deepening contraction in the property market, a slowdown in exports, and restrictions on semiconductors in the U.S. Reopening will begin to pave the way for a recovery in Chinese consumption, but much more. No. 60% of household wealth remains tied up in a weakening housing market.” Nonetheless, the outlook for China’s economy is much brighter than it was just a few months ago. After 2021 macro tightening and regulatory crackdown, the government is now stimulating the economy. Economists have raised their growth forecasts for the Chinese economy after China ended its zero-corona policy, with Bloomberg consensus now putting her at 5.1% for gross domestic product growth in 2023. Fourth quarter. MCHI 1Y line msci Citigroup economists said the economy had some upside surprises, including recent data on retail sales and the labor market. A faster-than-expected reopening could mean a quicker recovery, and its own forecast of 5.3% y/y growth in 2023 may ultimately be too low, it said. Citigroup is overweight China. Steven Wheating, chief investment strategist and chief economist at Citi Private Bank, said of MSCI China, “If earnings recover significantly in real terms at the beginning of the new cycle, China will grow to 20% this year. You can easily see a percentage increase,” he said. The iShares MSCI China ETF has already climbed 12.4% year-to-date, but is far from its high earlier this month. So far, the KraneShares CSI China Internet ETF is up 12.6% over the year and the iShares China Large-Cap ETF is up 12.2%. KWEB 1Y Line’s China Internet Wieting said it expects China to continue to open up and move forward despite the rapid spread of Covid in the country. “China cannot lock down again,” he said. He pointed out that the country is facing internal pressure from citizens protesting the restrictions. I’ve seen it allow the spread of what they believe is,” he said. “It’s highly contagious and not easily put back in the bottle.” Where to bet Wieiting said US investors could invest in China through the biggest companies. Some of them are top holdings in the iShares Emerging Markets ETF. For example, Tencent Holdings, Alibaba and Meituan are the top five holding companies. Earlier this week, Goldman Sachs said the best way to rebound in China would be to bet on Chinese consumers through e-commerce giant Alibaba. The stock is up 31% since the beginning of the year. BABA 1Y Line’s baba Wieting said the company is actively looking for opportunities in global markets as a way to diversify outside the US, but some investors fear that US markets will underperform. Appears to be newly attracted to overseas opportunities. Another way to fight China is through US companies doing business there. For example, Coca-Cola CEO James Quincey told CNBC this week that the end of lockdown is good for business. The increase in mobility is obvious, which is good for us,” he said. “We believe the trajectory of reopening will be very similar to that of the US and Europe.” Equity strategists at Barclays said China’s reopening should have limited impact on US markets. Stated. The S&P’s international earnings exposure is 30% for him, but direct earnings exposure to China is only 2% for him. Companies Barclays has identified exposure to China include Las Vegas Sands, Starbucks, Western Digital, BorgWarner and Tesla. Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute, said he still prefers the United States but is looking to other markets as well. The message is to look for multinationals that have influence in China.If they are active there, the Chinese need them there,” he said. Companies in sectors such as pollution abatement and healthcare could be beneficiaries. In the long term, financial institutions may also benefit. “In the future, when they get closer to opening up, U.S. and European companies will be there,” he said. face regulatory risks such as Companies like Apple, which have huge manufacturing bases in China, are actively seeking to keep some of their operations out of China. “From wolf warriors to wolves in sheep’s clothing.” said Chan, CIO of the Rockefeller Global Family Office. “We’re transitioning from wolf warriors to wolves in sheep’s clothing and trying to pretend to be nice.” Chan said companies and investors are embracing change quickly. “They want to go back to China, do business as usual, dissolve their intentions and improve relations,” he said. But investors should keep the political side in mind, he said. “[House] speaker [Kevin] McCarthy set up the commission with the aim of addressing the growing Chinese threat,” he said, adding, “I don’t think Xi Jinping himself has changed the long-term agenda, the Chinese dream or the long-term ambitions of Covid. ‘s lockdown has taken a toll on China’s economy and they want to get back on a growth trajectory in 2023. Fargo’s Christopher said he’s starting to reconsider emerging markets, especially in the long term. For investors, it’s a defensive quality holding.” ” He said, ”It doesn’t look like it’s going to happen yet.
