Analysing bulls in China’s shop
In the context of a multi-asset portfolio, it is important to distinguish between a tactical short-term rally and longer-term performance of the Chinese market
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AHEAD of the Golden Week celebrations marking the 75th anniversary of the establishment of the People’s Republic of China, capital markets rose to the sound of bullish calls as the country unleashed a multi-prong policy blitz that drummed up investor and consumer sentiment.
On Sep 24, China’s policymakers signalled a coordinated “whatever it takes” stimulus with a three-pronged approach comprising monetary easing, real estate policy support, and a 500 billion yuan (S$92 billion) liquidity facility for the stock market. President Xi Jinping chaired the Politburo meeting on Sep 26 and pledged further fiscal easing and support to stabilise the real estate sector.
Investors around the world swiftly recalibrated their stance towards China. Short covering by hedge fund and institutional investors drove one of the largest weekly rallies in more than a decade. The policy blitz also triggered a rethink by offshore investors of the consensus underweight positions on Hong Kong and China equities in their portfolios.
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