China’s beleaguered stocks have further to fall as coronavirus lockdowns dent economy, earnings says Swiss private bank UBP

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China’s stocks will probably extend their declines as investors have not fully priced in the economic damage from Covid-19 lockdowns, says UBP

Traders are disappointed that the central bank’s policy easing has been restrained and that Beijing is sticking to its zero tolerance approach to Covid-19

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China’s stocks will probably extend their declines as investors have not fully priced in the economic damage from Covid-19 lockdowns, says UBP. Photo: Bloomberg

Zhang Shidong

Published: 1:58pm, 22 Apr 2022Updated: 3:58pm, 22 Apr 2022

China’s stocks will probably extend their declines – already the biggest in Asia – as investors have not fully priced in the economic damage from coronavirus lockdowns and are too optimistic about the outlook for earnings, according to Swiss private bank UBP.

The bank lowered its projection for second-quarter economic growth to 3.5 per cent from 4.5 per cent, slower than the 4.8 per cent expansion in the preceding three months and significantly trailing the annual goal of 5.5 per cent.

UBP said listed companies would probably miss its forecast of an 11.4 per cent increase in corporate earnings for the year, which will lead to further compression of equity valuations.

In a separate note earlier this week, the bank said it has pared its holdings of Chinese stocks.

“We believe that markets may not have priced in the impact of weaker activity in the months ahead,” said Carlos Casanova, a senior economist at UBP in a report to clients on Friday. “Downward revisions to earnings will continue to drive the derating in the short term.

“Global investors should remain focused on de-risking [their] portfolios until a new equilibrium is reached.”

03:27

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