Hong Hao, the Chinese analyst who correctly called the reopening trade, now says stock gains have more room to run

The chief economist at Grow Investment Group recommended buying Chinese stocks at the end of October just before a 54 per cent surge in the Hang Seng Index

Hong sees Chinese stocks climbing in the event of a soft landing for the US economy or even if the world’s largest economy slides into a recession

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An electronic screen displays stock market data in Shanghai. A top strategist is once again upbeat on Chinese stocks. Photo: Getty Images

Published: 1:17pm, 22 May 2023

A top strategist who accurately called a market rally before China lifted Covid-19 restrictions has predicted Chinese stocks will resume their upward momentum even with a recession in the US.

Risk assets will benefit from the brightening outlook for Chinese exports and the nation’s manufacturing industry, if the Federal Reserve ends its tightening cycle, said Hong Hao, the chief economist at Chinese hedge fund Grow Investment Group, in his second-half strategy report on Sunday. And if the US slides into a recession, Chinese stocks will still rise as the People’s Bank of China (PBOC) will loosen monetary policies to counter the fallout, he said.

The first scenario will take time to materialise, while the second will see stocks decline first before the policy rescue induces a “tearing rally”.

“No matter which scenario eventuates, at today’s vantage point, we need to take a deep breath and hold onto our faith,” said Hong.

Hong Hao, the chief economist at Grow Investment Group. Photo: Xiaomei Chen

Hong recommended buying Chinese stocks at the end of October just before a 54 per cent run-up in the Hang Seng Index. He also correctly predicted the 2015 market meltdown that wiped off US$5 trillion in value. Hong worked for China International Capital Corp and Bocom International Holdings before joining Grow Investment last year.

Hong’s argument may instil some confidence in investors who are increasingly wary of the market’s prospects amid doubts about the strength of China’s recovery. The Hang Seng Index has dropped 13 per cent from a January high and the CSI 300 Index has been trading sideways over the past three months, with the reopening trade fizzling out.