Investor in China declines as zero-Covid continues
Global investors’ view on China has darkened, as many fail to see the end of the country’s zero covid policy.
The tightening of Covid controls in China has worried global investors since the beginning of the year. Many expected the policy to soften after the 20th National Congress, a reshuffle of the main leadership that sets the political and economic timetable for the coming years. But in a keynote address on Sunday, Chinese President Xi Jinping doubled down on the zero-covid strategy even as macroeconomic situations deteriorate.
Andy Rothman, lead investment strategist at Matthews International Capital Management and former U. S. State Department foreign service officer. In the U. S. , he cited politics as one of the party’s biggest negative investment signals. He’s afraid to hire,” he said. While China’s strict covid restrictions put in place at the beginning of the pandemic were effective early on, the technique disrupted global supply chains and weakened economic activity. “He wants to be changed,” Rothman said.
Matt Gertken, lead geopolitical strategist at sister company II BCA Research, urged investors to remain underweight in China after Xi’s speech. a new report. ” Any short-term relief meeting after the party congress is an opportunity to decrease exposure to Chinese assets due to the long-term mix of debt deflation and geopolitical conflict. “
Chinese stocks fell to multi-year lows in Hong Kong and New York in the days after Xi’s speech. Tech stocks such as Alibaba, Tencent and Baidu were hit the hardest.
Marko Papic, who heads Clocktower’s strategy team, said investors’ consensus expectations after the national congress are that Beijing is unlikely to completely abandon zero covid at least in the first part of 2023. [It will be] a fear [for investors] as it can cause constant economic disruption and prevent Beijing from stimulating domestic demand well,” he told II. increase investor sentiment. “
The deteriorating outlook comes at a time when investor sentiment toward the country has become more polarized. Lawmakers from EE. La university’s endowment were under pressure to investigate its assets in China for possible human rights abuses.
But some managers say depressed valuations in Chinese markets provide investment opportunities, especially in the generation sector.
Robert Horrocks, chief investment officer at Matthews Asia, believes U. S. investors have merit in China given the appreciation of the U. S. dollar against nearly all major currencies. He tells me that if he is willing to wait, he will be paid for this patience,” he said.