‘Buy the dip’ as stronger China stimulus could power multi-month rally: BofA
- ‘We are hopeful of a potential rally, and advise investors to ‘buy the dip’ in the coming weeks,’ BofA Securities equity strategist Winnie Wu says
- Fund managers differ on the direction of China’s market, with macro funds and US hedge funds bullish and investors closer to China turning more sceptical
There have been positive policy signals from Beijing to support the economy and rebuild confidence in recent weeks, and any strong follow-up measure will require increased borrowing either by households or the central government. Both cases will buoy market sentiment and provide upside, according to Winnie Wu, China equity strategist at BofA Securities.
“We are hopeful of a potential rally, and advise investors to ‘buy the dip’ in the coming weeks,” Wu said. The uptrend could last several months if the government can quickly launch an effective property stimulus that can “make property desirable again”, she added.
The MSCI China Index, which tracks over 700 companies listed at home and abroad, has retreated 4.5 per cent this month as investors booked profits after a rebound in late July on expectations of further stimulus measures after the Politburo meeting. The gauge has barely notched any gains this year, while the MSCI World Index has advanced 15.4 per cent.
The deteriorating economic outlook and lacklustre market performance have put some of the biggest Wall Street banks at odds on how Beijing would react.