Deutsche Bank is the latest global financial institution to advise investors to take caution in the Chinese market, underlining a number of issues in the medium-term including regulatory worries and a problematic real estate sector.
Deutsche Bank joins the growing consensus amongst global banks to take a wait-and-see approach on China after a horrid year for mainland stocks saw trillions of dollars in market value erased since the February peak.
«[W]hile valuations of Chinese stocks may now look attractive after recent declines, caution is still advised in the medium term – given regulation worries, slower Chinese growth, tighter credit and the problems in the real estate sector,» said global chief investment officer Christian Nolting in a recent report from the bank.
Policy Support
According to Nolting, policy support bodes well for reigniting optimism with «hints of some more flexible attitude» from the central bank and the potential for «some eventual rowing back of regulatory measures».
«The authorities will clearly want to have the economy on an even keel before [Xi Jinping’s] presumed accession to another presidential term late next year,» Nolting added.
Difficult Q1
Deutsche Bank expects a difficult first quarter in 2022 for Chinese markets but for more stable quarter-on-quarter trends through the year.
Looking forward, it prefers A-shares and policy-friendly sectors such as solar, electronic vehicles, semis, and industrial automation.
The bank forecasts Chinese economic growth to reach 5.3 percent in 2022, down from 7.7 percent in 2021.
