Potential gains to be found beyond China's mega-caps

WHILE China's recent regulatory changes targeting certain sectors may have surprised some investors, its stock market has experienced heightened regulatory tensions on a number of occasions during the past decade, eventually creating winners and losers as well as risks and opportunities for investors.

Nonetheless, given the speed of change and the inefficiencies that present themselves in the market, we believe China remains a fertile ground for stock selection. Looking ahead, we see China's stock market becoming more earnings-driven this year after a solid post-pandemic economic recovery. With liquidity no longer lifting all boats, we believe active stock selection will be paramount to identifying the best alpha-generating opportunities while mitigating risk.

Structural change creates new opportunities