Despite optimism from the bank about continued upside in Chinese equities, investor confidence and trust remains low, according to UBP, due to political uncertainty both locally and internationally.
Currently, UBP is still optimistic about continued upside in Chinese equities due to three main drivers: a headline reopening, support for the housing sector and consumption recovery. Nonetheless, some clients remain unconvinced and investor appetite remains relatively limited.
«I think generally, the confidence is low, trust is low and it will take a long time to recover even though the story is very clear,» said senior equity analyst Ling Vey Sern in a recent briefing attended by finews.asia.
Distance Matters
According to Ling, there is still relatively limited appetite, especially from international investors outside of China and the broader Asia region. This is due to ongoing uncertainty, including global headlines about the balloon saga and accusations of support for Russia in the Ukraine war as well as local headlines like the disappearance of China Renaissance chair Bao Fan.
«These are constant reminders to the global investor base that China is different,» Ling added. «All these things affect sentiment. The further away you are from China, the lower your confidence is.»
China Call
In the near term, UBP expects the initial reopening to benefit China’s internet, consumer, financial and healthcare sectors. In the longer term, beneficiaries will include Chinese tech, Chinese renewable energy, Chinese new energy vehicles and global commodities.
Noteworthy risks highlighted by the bank include the potential lack of monetary policy support and ongoing US-China tensions.
