Coronavirus: China’s quarantine rules raise the spectre of a Covid-made recession in the world’s second-largest capital market

Name: Shanghai locks down western bank of Huangpu River as Covid fight continues in China’s biggest city
Uploaded: 2022-04-13T09:32:35.000Z
Duration: 3 min 32 s
Description: Shanghai locks down western bank of Huangpu River as Covid fight continues in China’s biggest city

Keep a comfortable level of cash as Chinese stocks can still weaken from current levels amid fallout from Covid-19 lockdowns, strategist says

The Shanghai Composite Index has slumped 12 per cent this year, the worst among market benchmarks in Asia-Pacific, as city enters third week of lockdown

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Shanghai locks down western bank of Huangpu River as Covid fight continues in China’s biggest city

Cheryl Heng

Published: 5:32pm, 13 Apr 2022Updated: 10:32pm, 13 Apr 2022

Chinese stocks can still fall from current levels as Covid-19 lockdowns in Shanghai and several other provinces raise the spectre of “man-made recession” in the world’s second-largest economy. Be prepared to buy the dip, some analysts said.

“Earnings expectations for Chinese stocks have been fairly stable since last year, which are subject to negative surprises as Covid lockdowns drag on,” said Yan Wang, chief emerging markets and China strategist at Alpine Macro, a Montreal-based firm, in a report to clients on Wednesday.

The valuation levels, while already depressed compared with past averages as well as global peers, are not at historical extremes, he added.

Investors should, however, keep a “comfortable level of cash” to prepare for a possible rebound as policymakers in Beijing are likely to dig into their stimulus toolbox. Existing holders should resist cutting their positions, he added, recommending a contrarian stance.

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The Shanghai Composite Index has slipped 12 per cent this year, the worst among market benchmarks in Asia-Pacific, while the CSI 300 Index hit a 22-month low on March 15. In Hong Kong, the Hang Seng China Enterprise Index has weakened 11 per cent this year, on top of a 24 per cent sell-off in 2021.

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