Zurich-based Julius Baer has advised investors to remain sidelined on China, await its bottoming and seek alternatives in Asia.
Global investors remain cold on the Chinese market due to numerous headwinds, including ongoing real estate troubles. This includes Julius Baer, which is advising investors to remain sidelined for the time being and wait for the bottoming process to unfold.
«China is a waiting game and I think we’re going to keep waiting for the foreseeable future because President Xi Jinping's goal is to clean up the property development sector and he is willing to sacrifice growth to achieve that goal,» said Mark Matthews, Julius Baer head of research Asia, at a recent media briefing attended by finews.asia.
No Bazooka
According to Matthews, there is uncertainty about what the impetus will be for a turnaround, but what is highly unlikely is the roll-out of a major stimulus package similar to that of 2008.
«If there is a systemic crisis, of course, that would change but for now, they have avoided a systemic crisis by a constant drip of small stimuli and we can’t really see why that’s going to change because it’s worked so far,» said Matthews, noting that the bank is forecasting 4.4 percent GDP growth in China in 2024.
Alternatives to China
As a result, Julius Baer is advising investors to seek alternatives to China in Asian markets with critical mass and better prospects. It named India as a viable option due to a structural transformation and growth trends. It is also positive on Japan because of economic tailwinds, Tokyo Stock Exchange reforms and improved fund flows.
Globally, Julius Baer maintains its preference for the US within equities, especially for growth stocks in the tech and healthcare sectors. On fixed income, the bank advises investors to lock in yields, favoring dollar-denominated investment grade bonds. Within emerging markets hard currency bonds, Julius Baer is positive on Latin America, the Middle East and investment grade Asian corporate issuers.
