China bulls getting tired of waiting for elusive stock recovery
Over the past two weeks, long-standing China bulls UBS Global Wealth Management, Nomura Holdings Inc., and JPMorgan Chase & Co. have all downgraded the country’s equities, citing concerns ranging from the property-led demand slump to piecemeal stimulus measures and geopolitical tensions ahead of the US elections.
The thinning patience with an increasingly elusive Chinese stock rebound has coincided with growing consensus among the world’s biggest banks that the country will fail to meet its growth target of around 5% this year. The market weakness could also quicken a shift away from the China-centric model toward new favorites like India, Taiwan and Southeast Asia.
“I find this slew of downgrades to be like people throwing in the towel” on China equities, said Britney Lam, head of long-short equities at Magellan Investments Holding Ltd. While light positioning may trigger a short-term rebound in China, Lam said she prefers Japan and India in the long run.
Down 5.8% this year, the benchmark CSI 300 Index ranks among the world’s worst-performing major gauges and is heading for a record fourth year of losses. While hopes for improved corporate earnings and stronger policy support helped the index produce a 16% rally between February and May, the gains have mostly evaporated after a dismal earnings season delivered a reality check.
Entrenched pessimism about China’s growth prospects is also evident in other markets. Yields on China’s 10-year sovereign note dropped to a fresh record this week while the 30-year
