Chinese analyst who made correct call on stocks is cautious as regulator talks up market

An analyst who accurately predicted the performance of Chinese stocks last year is cautious on equities, even as the country’s regulator said the market is a haven and some brokerages calling a bottom.

A meaningful rebound in the world’s second largest stock market probably will not materialise until China finalises the schedule of its postponed annual legislative and political advisory meetings, according to Chen Li, chief economist at Soochow Securities in Shanghai. The two sessions – the National People’s Congress and the People’s Political Consultative Conference – usually held in early March to set the economic growth target and policy tone for the year, but have been delayed this year because of the coronavirus outbreak.

Chen had correctly predicted China’s stocks would rise in the first quarter last year and gradually run out of steam for the rest of the year. His view contrasts that of the China Securities Regulatory Commission. The regulator’s vice-chairman Li Chao said over the weekend that the effect of the global sell-off on Chinese stocks would be temporary because of the relatively low ratio of leveraged buying and cheaper valuations.

Essence Securities said last week that Chinese equities had already troughed, noting fundamentals would improve after the country’s worst-ever economic data in the January-February period.

The major uncertainty facing Chinese stocks stems from the domestic policy front rather than overseas turbulence and how much Beijing is willing to go further to bolster growth amid the global coronavirus pandemic is not clear, Chen said.

“It would be difficult for China to achieve its growth targets now as the first-quarter growth would probably be zero. And, we haven’t seen any substantial policy from the government.”