Credit Suisse says it's too early to return to China stocks

[SINGAPORE] It's "too early to return to China" for equity investors, as Beijing's policy isn't loosening, economic cycles favour other Asian markets and earnings-estimate revisions lag those of the region, according to Credit Suisse Group.

The investment bank is sticking with its underweight position on China in its Asia equity allocation, even as many global investors are warming up to the nation's battered stocks amid bets that Beijing's regulatory overhaul has potentially peaked.

"While growth is accelerating or broadening in some countries, we do not yet see a recovery for China," and expect steady rather than loosening government policy ahead, analysts Dan Fineman and Kin Nang Chik wrote in a note Wednesday (Oct 27). "We continue to rank the markets of the south - Asean and India as our favourites" due to economic reopening from a low base, they wrote.

Credit Suisse's views are at odds with recent optimism shown by some of the world's biggest asset managers such as BlackRock, and also the likes of UBS Group and HSBC Holdings. "Cyclical macro trends, EPS momentum and currencies favour other markets in Asia," Credit Suisse strategists wrote.

Chinese stocks had slumped on Wednesday as a rekindling of US-China tensions shook investors' newfound optimism, perhaps serving a reminder that while regulatory pain may be easing, multiple headwinds remain for the nation's markets. These include an economy that's slowing more than expected, earnings that are losing steam, a fresh Covid-19 outbreak and China Evergrande Group's liquidity woes.

BLOOMBERG