Unlike last year’s series of sudden tightening against the tech firms in China, Citi Private Bank expects authorities to deliver «more predictable and stable» regulations in the sector and recommends investors to enter at current levels.
Despite worries about China’s ongoing tech crackdown and debt-laden property sector, Citi Private Bank is the latest financial institution to turn positive on the mainland’s equity markets.
«We are a bit more bullish for the Chinese market this year,» said Ligang Liu, Citi Global Wealth’s recently appointed Asia Pacific head of economic analysis, in a recent virtual briefing.
«Given the valuation last year, perhaps it is a good opportunity for investors to reconsider those Chinese tech companies. After all, the Chinese economic fundamentals have not changed much.»
«More Predictable And Stable»
For those concerned about the regulatory crackdown against the tech sector, Citi Private Bank does not forecast a repeat in 2022.
Although tightening is expected to continue, Liu highlights Beijing’s recent description of using a ‘traffic light approach’ – an analogy to describe regulating not only by strictly communicating what is allowed (green) or prohibited (red) but also what requires caution (yellow).
«If that is the approach, it means that the regulation will be more predictable and stable in the coming years,» Liu said.
Policy Support
In addition to greater regulatory predictability, Liu also underlined monetary easing and, more interestingly, the upcoming Communist Party National Congress in late 2022.
«Historically if you look at the years when there’s a party congress, China’s stock market tends to perform very well,» Liu added.
In addition to the tech sector, Citi Private Bank is also positive on Chinese financials and expects both A and H-shares to benefit from the positive policy backdrop.
