While global investors remain reluctant to reenter China for the time being, 2024 could be the trough for the country with market opportunities emerging in the second half of the year, according to Deutsche Bank’s Stefanie Holtze-Jen.
Global investor appetite for China remains limited after three consecutive years of equity losses. Since peaking in February 2021, the CSI 300 Index has plunged by more than 40 percent.
«China remains the elephant in the room,» said Stefanie Holtze-Jen, APAC chief investment officer at Deutsche Bank Private Bank, in a media briefing attended by finews.asia. «Lack of confidence can be seen not only in Chinese equities but also in other Asian markets that are tied into the China recovery.»
Three Factors
Despite stable earnings per share, Holtze-Jen highlighted three major factors that have been affecting the outlook for China.
Firstly, sentiment remains weak, resulting in outflows into other markets like India and Japan. Secondly, there is a shortage of macro data surprising on the upside. Thirdly, consumer confidence is still lacking.
Trough Year
Nonetheless, Deutsche Bank remains optimistic about China in the longer term and forecasts that 2024 will be a trough year for the country. With the exception of the real estate sector, Holtze-Jen said that earnings are improving across the board and exports have turned positive. The mix of the economy is also shifting away from property to high tech sectors with beneficiaries in areas like electronic vehicles.
«I don't want to circumvent China at all. We will be looking at the China equities opportunity as something that will probably play out in the second half,» she added.
Market Outlook
In terms of the broader equity market, Deutsche Bank is most positive on the US, where a soft landing is expected. It advises investors to take a closer look at Europe and Japan while naming India as the long-term market of choice.
Within fixed income, it is positive on investment grade corporate bonds due to interesting real yields and low default rates.
