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China’s weaker-than-expected economic recovery, underwhelming policy response and higher US interest rates have been the bane of investors’ lives of late. Persistent property sector woes and lingering concerns about tech sector regulations and crackdowns added further pressure. Things are changing for the better.
“All the worst news is priced into the market. The media and [market] players are entrenched in great dislike and linear extrapolation,” said Chua, founder and chief investment officer at Asia Genesis Asset Management. “Chinese policymakers are taking more economic measures to address the bear market and loss of confidence.”
“For long term investors looking for big upside in future, high quality Chinese stocks are a no-brainer. This is an unprecedented once-in-a-lifetime opportunity to invest in Hong Kong and mainland stock markets.”
Chinese stocks are unlikely to fall much further from current levels, as the market valuation has slipped below its five-year average, Yan Wang, chief China strategist at Alpine Macro, said in a podcast. A stronger rebound, however, may be elusive without a fresh policy tonic from Beijing, he said.
“There’s no clear catalyst that can trigger a more positive re-rating, unless Beijing really fundamentally changes its policy direction,” he added.
This year’s three best winners are electric-car maker Li Auto, laptop maker Lenovo and state-controlled oil firm PetroChina, registering 91, 70, and 44 per cent jumps respectively. Combined, the trio gained an additional market value of US$74.9 billion.
Li Ning, Country Garden Services and car dealership Zhongsheng Group lost a combined US$28 billion of market value as they closed out the year at the bottom of the pile among the Hang Seng Index’s 82 members.
The record four-year slump in Hong Kong, however, has made the potential payoff appealing for Chua, a former investment manager at the Monetary Authority of Singapore. His flagship Macro Fund has gained every year since its inception in May 2020, according to data on its website.
“China and Hong Kong stocks are about the cheapest relative to emerging markets,” he said. “Earnings are improving steadily for many Chinese firms, despite the very negative Western narrative. Top Chinese companies are moving into higher profit margins businesses.
“Risk reward is the best I have seen in 40 years of investing and trading. The best thing is it offers great scale and choices.”
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