UBS stays upbeat on stocks in China’s bear market as policy easing measures gain momentum
- The CSI 300 Index of biggest stocks in Shanghai and Shenzhen has lost more than 20 per cent from its February 2021 peak, a technical bear market
- UBS expects PBOC to lower the reserve-requirement ratio this year, among key calls on the policy front
A torrent of credit from local commercial banks, easier financing for home purchases and fee cuts for smaller businesses are among signals officials are treating China’s slowest growth since mid-2020 with urgency, according to Meng Lei, a Shanghai-based strategist at the Swiss investment bank.
“Most of the market risk factors have dissipated,” Meng said in a February 23 note to clients. “While it will take time for sentiment to recover, investors could become more positive” about the market outlook going forward, he added.
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UBS expects China’s central bank to lower the reserve-requirement ratio this year, adding to two cuts in policy interest rates in December and January to slash funding costs for businesses. Banks wrote a record 3.98 trillion yuan (US$630 billion) of new loans last month, a sign China is reopening the lending tap.