Not too late to chase Chinese stocks ‘still near the bottom’ for Credit Suisse as others fret about zero-Covid pain

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MSCI China Index has risen 6.2 per cent in June, the best month since January 2021, while the CSI 300 is 2 per cent away from bull-market territory

`The fish is still close to the bottom’ despite recent sharp rebound, says Jack Siu, Greater China chief investment officer Credit Suisse

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People ride bicycles on the street next to the large screen showing the stock exchange data in Shanghai in November 2021. Photo: EPA-EFE

Cheryl Heng

Published: 3:00pm, 1 Jul 2022Updated: 3:40pm, 1 Jul 2022

More investors are looking at Chinese equities in a positive light, with the benchmark MSCI China Index clinching its best month since January 2021. Better regulatory signals and tweaks to Beijing’s zero-Covid policy will be key to sustaining the recovery, strategists said.

China made some changes to its anti-pandemic curbs late last month by shortening quarantine days, while restrictions on intercity travel were also relaxed. Authorities have also highlighted the role of fintech and internet-platform companies in supporting recovery efforts, giving tech stocks a shot in the arm.

Market bulls were rewarded for picking up the pieces as the MSCI China Index strengthened 5.7 per cent in June, the most in 17 months. Global stocks lost 8.6 per cent, the worst since March 2020, and slipped into a bear market. While the rebound has added US$700 billion of market capitalisation, it’s still not too late to join the party, according to Credit Suisse, which re-entered the market right after the mid-March rout.

“The reality is with the market already down some 60 to 70 per cent, depending on the index you use, the fish is still close to the bottom,” Jack Siu, Greater China chief investment officer at the Swiss investment bank, said on June 29. “We are still at a level where we do not think these stocks are expensive.”

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‘It feels like coming home’: Shanghai Disneyland reopens after 3-month closure

The MSCI China Index, which tracks 739 stocks listed at home and abroad, currently trades at 11.4 times price-earnings multiple, according to data compiled by Goldman Sachs, compared with a five-year historical average of 15 times. The US bank forecast the index to climb by about 13 per cent by year-end while the CSI 300 has 11 per cent upside.