By Naomi Rovnick
LONDON- Global investors are preparing to stake bets on China again, in a major sentiment shift sparked by Beijing’s drive to reverse its economic slowdown and revive long term interest in its stock markets.
It is early days and few money managers expect a Chinese growth boom anytime soon. But government moves to entice more cash into equities and jolt consumer spending have boosted the appeal of still-low Chinese company valuations, said investors at groups overseeing more than $1.5 trillion of client funds between them.
“We’re going to be very disciplined but in aggregate we feel there’s more upside than downside,” said Gabriel Sacks, emerging market portfolio manager at Abrdn which manages 506 billion pounds ($677 billion) of assets.
He said the group had bought China stocks “selectively” last week and would wait for more detailed policy plans from Beijing following some unusually candid economic support pledges that generated a sharp stock market rally in recent days.
China’s factory activity shrank for a fifth straight month and the services sector slowed sharply in September, suggesting Beijing may need to move urgently to meet its 5 percent 2024 growth target.
Long term institutional investors mostly stayed on the sidelines last week as hedge funds sent Chinese stocks surging to cheer a stimulus bonanza, data sent to clients by Goldman Sachs strategist Scott Rubner showed.
Mutual funds’ China equity holdings dwindled to 5.1 percent of portfolios, a decade low, in late August, Rubner said.
Chinese consumer confidence has taken hard knocks from a property crisis rooted in President Xi Jinping’s moves to stop a pile of risky real estate debt estimated at more than $1 trillion from growing. Meanwhile, US -China tensions have escalated.
But investors reckoned the tide was turning after Beijing authorities promised to spend as necessary to hit the 5 percent growth target. They also eased some home-buying restrictions, cut bank lending rates and offered brokers cheap funds to buy stocks.
“There’s too much of a disconnect between what (Chinese stock) valuations are pricing in and that improving policy narrative,” said Natasha Ebtehadj at Artemis Fund Managers.
She added that she had topped up her Chinese equity holdings in the last few days and taken some new positions. – Reuters
