Is
it
time
to
buy
China,
or
should
investors
continue
to
avoid
this
market?
Quite
a
few
developments
surrounded
the
Asian
giant
this
week.
Chinese
stocks
dropped
to
an
almost
five-year
low
last
week,
reflecting
persistent
bearishness
from
the
past
year.
But
this
week,
China
embarked
on
monetary
easing
as
it
pledged
to
reduce
the
amount
of
liquidity
that
its
banks
are
required
to
hold
as
reserves.
Reserve
ratio
requirements
for
banks
will
be
cut
by
50
basis
points
from
Feb.
5.
Its
central
bank
also
said
Wednesday
that
there’s
room
for
further
easing.
Earlier
this
week,
Bloomberg
News,
citing
sources,
reported
that
China
is
considering
a
$278
billion
package
to
rescue
its
stock
markets.
Is
it
time
to
get
back
into
Chinese
markets?
Investors
have
been
avoiding
them,
in
light
of
factors
such
as
the
property
debt
crisis,
which
has
triggered
financial
risks
through
the
broader
economy,
as
well
as
deflation.
Here’s
what
analysts
are
saying.
Buy
when
there’s
‘blood
in
the
streets’
Brendan
Ahern,
chief
investment
officer
at
KraneShares,
acknowledged
that
China
markets
are
facing
“peak
pessimism,”
but
that
there
can
be
“some
pretty
explosive
rallies”
at
these
levels.
“I
think
you
cannot
go
long
naked.
I
think
you
have
to
kind
of
protect
yourself
using
options
strategies
or
structured
notes.
But
we
know
as
professionals
we
should
be
buying,
that
when
there’s
blood
in
the
streets,
this
is
when
you
buy
—
you
just
have
to
be
very
careful,”
he
told
CNBC’s
”
Street
Signs
Asia
”
on
Thursday.
Andrew
Lapping,
chief
investment
officer
at
Ranmore
Fund
Management
,
says
the
sharp
decline
in
China
markets
is
an
“opportunity.”
“Over
the
past
year,
the
S
&
P500
is
up
over
20%
while
the
Hand
Seng
is
down
30%.
There
is
no
way
the
underlying
business
values
have
diverged
to
this
degree,”
he
said
in
a
Wednesday
note.
“This
underperformance,
particularly
over
the
past
month,
has
given
us
the
opportunity
to
buy
high
quality,
well-capitalised
businesses
at
very
low
prices
–
an
exciting
opportunity,”
he
added.
Winnie
Wu,
chief
China
equity
strategist
at
BofA
Securities,
believes
that
although
China’s
economy
has
weakened,
its
problems
are
“not
as
terrible
as
what
the
stock
market
has
reflected.”
“So
the
stock
market
is
certainly
putting
much
higher
equity
risk
premium
…
there
are
also
concerns
about
policy
direction,
policy
clarity
…
I
think
these
measures
to
stabilize
the
stock
market
helps
like
rather
than
putting
a
floor
to
stop
some
of
this
capitulation,”
she
said.
Renowned
value
investor
Guy
Spier
was
less
optimistic,
saying
that
the
$278
billion
package
won’t
be
enough.
“The
markets
are
a
strange
beast
that
won’t
be
fixed
by
throwing
state
money
at
the
problem.
The
CCP
have
to
take
a
hard
look
at
their
policies
and
start
listening
better
to
the
needs
of
business,”
he
told
CNBC’s
Tanvir
Gill.
But
he
believes
that
the
government
will
get
it
right
—
eventually.
“Of
course
China
can
and
China
will
bounce
back,”
he
said.
“China
did
an
about-turn
on
its
Covid
policy,
so
I
think
that
they
are
also
capable
of
adjusting
their
business
–
unfriendly
policies
of
the
last
few
years.”
How
and
when
the
market
will
recover
Two
things
need
to
happen
before
the
stock
market
can
turn
around,
according
to
Wu.
The
first
is
that
consumers
need
to
regain
their
confidence
in
the
property
sector,
she
said,
adding
that
2024
“will
be
the
most
difficult
year”
for
the
sector.
Next
year,
more
government
projects
in
terms
of
social
housing
and
reconstruction
will
kick
in
and
support
commodity
demand,
she
added.
“On
the
other
side,
China
needs
to
convince
investors
what’s
going
to
be
the
new
growth
driver,
what’s
after
property,
and
is
that
going
to
be
big
enough
for
employment
to
drive
your
4%,
5%
or
3%
GDP?”
Wu
said.
Wu
predicts
that
a
market
turnaround
can
happen
in
another
12
to
18
months.
“We
are
getting
into
this
adjustment
…
trying
to
reduce
the
reliance
on
property
…
into
something
high
tech
–
advanced
manufacturing,”
she
added.
Ahern,
for
his
part,
said
the
government
needs
to
continue
its
efforts
to
restore
investor
confidence.
“There
has
been
a
change
in
the
tone
and
tenor
of
the
government
to
foreign
investors,
foreign
corporations.
That
confidence
isn’t
going
to
come
back
overnight
but
they
have
to
keep
moving
in
this
direction.
They
have
to
keep
being
transparent
on
what
the
next
actions
are
going
to
be,”
he
said.
How
to
invest
French
asset
management
company
Amundi
said
that
there
is
a
renewed
focus
on
tech
and
the
energy
transition.
In
artificial
intelligence,
for
instance,
China
is
“quickly
closing
the
gap”
with
the
United
States
in
AI
research.
It’s
also
leading
in
quantum
computing,
Amundi
said.
JPMorgan
and
Morgan
Stanley
likes
these
top
U.S.-listed
Chinese
tech
stocks.
Amundi
noted
that
China
has
been
the
biggest
investor
in
clean
energy
in
the
past
decade,
and
is
now
the
largest
producer
of
solar
panels,
wind
turbines
and
electric
vehicle
batteries
in
the
world.
One
chief
investment
officer
likes
this
Chinese
EV
stock
and
a
mining
stock
to
tap
the
energy
transition.
UBS
said
in
a
Jan.
17
note
that
investors
should
adopt
a
barbell
strategy
by
holding
stocks
in
recovery
beneficiary
sectors
such
as
consumer,
internet
and
industrials,
as
well
as
high-yielding
stocks
in
defensive
sectors
such
as
banks,
insurers
and
utilities.
The
latter
category
can
“navigate
through
market
volatility
in
case
further policy support falls short of expectations.”
A
barbell
strategy
strikes
a
balance
between
reward
and
risk
by
investing
in
high
and
low-risk
assets.
“For the
longer
term,
we
prefer
sectors
benefiting
from
strong
policy
tailwinds,
including
industrial
automation, digitalization,
electric
vehicle
(EV)
supply
chain,
and
renewable
energy,”
the
bank
said.
UBS
likes
these
stocks:
China
internet:
Alibaba
,
Baidu
,
NetEase
.
Industrials:
China
Communications
Construction.
Banks
and
insurance:
China
Construction
Bank
,
Ping
An
Insurance
.
Renewable
energy:
China
Longyuan
Power
Group,
China
Resources
Power.
—
CNBC’s
Tanvir
Gill,
Michael
Bloom
and
Evelyn
Cheng
contributed
to
this
report.