CLSA says sell-off in Chinese stocks ‘has passed strongest point’ and Beijing needs to address market risk, investor concerns

‘The bulk of the selling pressure has passed its strongest point because most people are already underweight’ on Chinese stocks, head of research says

Investors need to assess not only China’s fundamental outlook, but also whether the downside is already in the price

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China’s exports, infrastructure and property are all reaching “a point of maturity” and the transition to new sources of growth could lead to more volatility, CLSA researcher Shaun Cochran says. Photo: Jonathan Wong

Published: 6:30am, 11 Sep 2023Updated: 4:31pm, 11 Sep 2023

Chinese stocks have seen the worst selling pressure, indicated by many underweight positions among global funds, according to CLSA, a unit of China’s biggest securities firm. An imminent pause in the Federal Reserve’s tightening policy is likely to reverse market pessimism.

China is still appealing to investors as the cheap valuation and secular growth could provide better returns relative to other equity markets, head of research Shaun Cochran said. It is time for Beijing to address “absolutely reasonable” concerns and real risks in the economy, he added.

“For my mind, the bulk of the selling pressure has passed its strongest point because most people are already underweight,” he said in a Post interview. “I have never seen investors so negative on the outlook for China. I would rather have my money in a Chinese index than a US index” over the long term, he added.

The CSI 300 Index tracking the largest stocks listed in Shanghai and Shenzhen climbed 0.7 per cent on Monday from a two-week low. The yuan jumped 0.7 per cent to 7.2903 per dollar in onshore trading, after the central bank vowed to stem one-way speculative bets against its currency.

Shaun Cochran, in his office located at One Pacific Place in Admiralty, Hong Kong, on September 5, 2023. Photo: Jonathan Wong

The MSCI China Index, the broadest measure covering 755 stocks traded at home and abroad, fell 1 per cent last week, adding to a 4.7 per cent slide this year through August. The Hang Seng Index has declined 8 per cent this year, trailing the 13.3 per cent gain in the MSCI World Index and the S&P 500 Index’s 16.1 per cent advance.