BNP Paribas Wealth Management is bullish on China – in part due to a peaking dollar – with Asia chief investment officer Prashant Bhayani calling for investors to buy the dip in equity markets.
Since October 2022, BNP Paribas Wealth Management had been warming up to Chinese equities and advising clients to consider adding exposure, according to Asia CIO Prashant Bhayani. The call played out favorably with a strong market rebound since and while Bhayani notes that some consolidation could be due, he believes there is more upside in 2023, especially due to the path of dollar strength.
«On the Fed, we think there’s 50 [basis points] left. We think they’ll be on hold after that – pause, not pivot,» Bhayani said in a recent webinar attended by finews.asia on US monetary policy in 2023, citing inflationary pressures as a key driver for the lack of subsequent loosening.
Non-US Equities
While the bank is not ready to call the bottom yet on markets, Bhayani notes that non-US equities like China tend to outperform when the dollar weakens.
«We were selling the rally last year, as we were pretty cautious. We think this year, generally, you can start buying the dips in equities […] on some of the oversold markets, including in China,» he explained.
In addition, Bhayani also underlined positive drivers from China aside from its reopening, including loosening in the property sector and expected shifts in investor weightings due to previously depressed sentiments.
Overweight China
Consequently, BNP Paribas Wealth Management is overweight on Chinese equities with preferences for certain areas such as domestic consumption, tourism, healthcare and electronic vehicle supply chains.
Still, Bhayani notes that there are downside risks that could de-rail the China call such as a setback in its reopening process or a lack of accelerated lending to bolster a recovery in the property sector.
