Look east: Hong Kong and China equities at inflection point

THIS June, more than 13 million students sat China’s 2024 national college entrance exam (or gaokao). China market participants have been facing a similar test of perseverance, as they wait to see to whether the sharp rebound in its equity market will prove short-lived, like the stop-start market rebounds of the past two years. Will it be more durable this time?

Over the past three months, the MSCI China Index rebounded by over 20 per cent from its mid-January 2024 trough, entering a technical bull phase that significantly outperformed the S&P 500 index and MSCI World Index. Despite the recent pullback in China and Hong Kong markets from profit taking in May, we believe this market recovery is in its early stages and poised for gains over the medium to long term.

We recently upgraded China and Hong Kong in our equity strategy to “overweight”, as the fundamental risk-reward of China and Hong Kong equities has reached an inflection point. Our confidence is driven by the following: