Disappointment in the Chinese market and economy has led investors to seek for alternatives, according to UBS’s Min Lan Tan who underlined growth stabilization as a key factor to reversing the trend.
Post-reopening momentum in China is losing steam, resulting in signs of a slowing economy and a stock market that has erased all gains made earlier this year. Year-to-date, the CSI 300 index is down around 0.5 percent. This has resulted in investors increasingly shunning the market altogether.
«A theme we’ve been hearing a lot is, effectively, how to invest outside of China,» said Min Lan Tan, UBS Global Wealth Management’s head of APAC chief investment office, at a media briefing attended by finews.asia.
«People are looking for alternatives to China. It’s very hard to replace the second largest economy in the world but, nonetheless, there is a lot of focus on looking for China alternatives.»
Asia Ex-China
Within Asia, UBS has selected India and Thailand as the most preferred markets outside of China. Other opportunities include new economy leaders in Southeast Asia, regional banks and Asian dividend stocks.
Outside of emerging markets, UBS is also positive on Japan, especially in the medium-term. Areas of interest include large cap banks and value stocks in the country.
Stabilization Needed
According to Tan, China is not being completely counted out by investors. In fact, it is now a major value play, particularly in the internet sector which has seen persistent regulatory pressures. The bank itself is suggesting to invest using a barbell approach of quality state-owned enterprises focused on reforms and dividends alongside beneficiaries of the recovery, such as consumer stocks.
«We know value stocks can stay cheap for a long time. But with the right catalyst, they can re-rate pretty strongly. So, people are keeping an eye on China to see whether or not there are real policies coming out that could result in a re-rating,» Tan added.
«What investors want to see is a sense of growth bottoming and stabilizing in China. We need macro stabilization. We need a stabilization of the narrative with regards to US and China.»