Bullish China stock forecasts doubted by money managers who see no risk appetite, Bank of America survey shows

Name: As mainland China reopens, what is the market outlook for the mainland and Hong Kong?
Uploaded: 2023-06-14T10:11:52.000Z
Duration: 11 min 31 s
Description: As mainland China reopens, what is the market outlook for the mainland and Hong Kong?

Some 20 per cent of participants are banking on Asia’s largest economy to strengthen over the next 12 months, versus 49 per cent in May and 79 per cent in April

Bank of America’s latest survey is based on responses from166 fund managers who manage about US$329 billion of assets

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A survey shows Asian fund managers are losing confidence in China’s economic growth and stock upside. Photo: Bloomberg

Jiaxing LiandYulu Ao

Published: 6:11pm, 14 Jun 2023Updated: 6:13pm, 14 Jun 2023

China’s stuttering post-pandemic recovery is eroding the confidence among regional fund managers about the outlook for the nation’s growth and stock market returns, according to a Bank of America survey.

Some 20 per cent of participants are banking on Asia’s largest economy to strengthen over the next 12 months, the US bank said in a report, based on a June survey of 166 investors who manage about US$329 billion of assets. The ratio slipped from 49 per cent in a May survey and 79 per cent in April.

While not outright bearish, a noticeable lack of risk appetite has crippled the stock market in recent months, with only 5 per cent of investors in the survey holding an overweight position in China versus 27 per cent in April and 39 per cent in March, the bank added.

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As mainland China reopens, what is the market outlook for the mainland and Hong Kong?

“The fragile economic recovery in China has underwhelmed one and all,” strategists including Ritesh Samadhiya wrote in the June 13 report. “Market expectations in China are tepid as well, although not outright bearish.”

China’s economy has been struggling as the reopening euphoria has faded. Manufacturing contracted last month while exports shrank, while deflation deepened and consumption waned. That has partly contributed to a 17 per cent sell-off in the MSCI China Index, a gauge tracking US$2 trillion of stocks, from its January peak.

Nomura forecasts the MSCI China Index to reach 67 by the end of 2023, implying a 7 per cent upside from the current level. It expects the MSCI Asia ex-Japan Index to rise 3.3 per cent to 671. Goldman’s forecast for the MSCI China Index is 70 by March 2024, while Morgan Stanley sees that level only by June 2024.