China’s stock investors should expect volatility, slimmed-down stimulus and targeted help, says National People’s Congress

Name: The ‘two sessions’ explained: China’s most important political meetings of the year
Uploaded: 2020-05-31T23:00:22.000Z
Duration: 3 min 35 s
Description: The ‘two sessions’ explained: China’s most important political meetings of the year

China’s biggest political gathering signals special breaks for electric vehicles, 5G network, medical equipment

Sell-offs should offer buying opportunities in Hong Kong, where stocks are cheaply valued

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A man is seen through a CT scanner at the showroom of the medical imaging equipment maker Beijing Wandong WDM Medical Technology during a government organised tour of the facility following the outbreak of the new coronavirus, in Beijing on May 14, 2020. Photo: Reuters

Yujing Liu

Published: 7:00am, 1 Jun 2020Updated: 7:26am, 1 Jun 2020

China’s most important political event of the year told investors to expect three key things: stimulus will be put on a diet, stock volatility following China’s move to tighten its control over Hong Kong will offer buying opportunities, and helpful breaks are coming for targeted sectors such as electric vehicles, medical equipment and the 5G network.

Of the three, analysts predict the surprise move at the National People’s Congress meeting that ended last week to impose a highly controversial national security law on Hong Kong will turn out to be the most significant to investors.

It adds uncertainty to Hong Kong-listed stocks by raising red flags about the city’s future as Asia’s leading financial hub. It has already sparked threats by US President Donald Trump, further souring relations between Beijing and Washington.

Investors “should expect greater volatility more than anything else” in the near term, said Bhaskar Laxminarayan, chief investment officer in Asia at Swiss wealth management group Julius Baer. “There are a lot of emotional responses, and emotional responses create volatility.”

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The ‘two sessions’ explained: China’s most important political meetings of the year

Beijing’s move to impose the new legislation, which will prohibit any act of treason, secession, sedition and subversion against the central government, is seen by critics and foreign governments as a major step to erode the high degree of autonomy promised to Hong Kong. The law is expected to be drafted and approved as soon as by the end of June, when the legislature’s standing committee convenes.