Despite reopening hopes and stimulus injections, Deutsche Bank has not yet advised investors to fully reenter the Chinese market.
China is well placed to achieve relatively robust growth for the rest of 2022 with a handful of tailwinds at play including a commitment to gradually reopen, monetary and fiscal stimulus and, most notably, a better inflationary outlook. Nonetheless, Deutsche Bank believes that there are challenges elsewhere – it was the first major global bank to call for a U.S. recession – that could impact the outlook and is advising investors to be patient for the time being.
«The problem is, of course, you have these external headwinds that Asia, as much as China, is not totally able to decouple from so, therefore, it’s good to wait first,» said Stefanie Holtze-Jen, APAC chief investment officer at Deutsche Bank International Private Bank, during a recent webinar attended by finews.asia.
«We are staying cautiously optimistic. We have not yet overweight the Chinese equity market but we stand ready to see when the global picture has calmed down a little, coupled with signs from the domestic economy. It’s all about timing in China.»
Outperformance in 2022
Despite having yet to make an overweight call, the bank expects incoming upside for Chinese equities with the opportunity to outperform global equities in the second half of 2022.
It names three main drivers which include a more visible growth recovery domestically driven by reopening and stimulus; regulatory easing in the tech and property sectors; and potential reduction of U.S. tariffs on Chinese imports.
Zero-Covid: Here to Stay
While the bank expects China’s strict zero-Covid policy to remain in place, it still expects the environment to improve with its annual GDP forecast for the country unchanged at 4.5 percent – above the consensus view of around 4 percent.
«These lockdown periods will get shorter and shorter with mass testing being done extremely quickly so that we don’t see these prolonged periods of economic slowdown anymore,» Holtze-Jen added.
