Will China market be bullish again?

Bearish Sentiment in China

In the 2020s, the news of Evergrande's debt leveraging, Alibaba's mishap and DIDI's removal has shook the world.

We have experienced a huge downfall in Chinese market for the last 12 months due to the intervention of CCP.

Be it your Hang Seng Index or Shanghai Composite Futures, or different Chinese equities.

Most of them have taken a beating of at least 20-60% during the last 2 years.

CCP's actions

In my fair opinion, I believe the Chinese Communist Party (CCP) has applied those methods as a form of deleveraging their economy.

As they are aware of China's excessive indebtedness in their own market, which ultimately triggered a property meltdown last year.

Their actions prevented the next US financial crisis in 08 and 09s.

However, there is repercussion to their actions, that causes fear, uncertainty and doubt (FUD) throughout the world.

Most analysts deem Chinese stocks as dead or scam, while others saw it as an opportunity to invest.

China Current Situation as of now..

It is unclear how Chinese stocks will grow in the next few years..

The start of the year has shown PBoC and Chinese government has injected stimulus to their economy to recover the market.

- On December 27, the MoF reiterated that it would “strengthen the coordination and linkage of fiscal and monetary, employment, and other policies” and added that the government will “give play to the role of fiscal policy to stabilise investment and promote consumption.”

- On January 5, Premier Li said the government should implement “new and greater combined tax and fee cuts to ensure a stable start for the economy in Q1 and stabilise the macroeconomics".

- The PBoC recently added a new call to “take more proactive measures to boost support for the real economy” and “better stabilise the aggregate credit growth” as well as “bring down the overall financing costs for businesses.”

A glimmer of hope has been shown for most Chinese's investors, whom have held their stocks in HKSE or SZSE for the last 24 months.

But that is still insufficient to move the market quickly back to the bull market.

And below, we show the opposite price action in China’s stocks and bonds relative to the US.



The graph shows that Chinese market is now quite attractive as compared to the US market. And Bond Yields have room to fall, which makes stocks more attractive in the long run compared to the US market, which is relatively overextended as we speak.

My Opinion

I believe the Chinese government will do what it takes to ensure stability in longer term for their economy and to regain investors back into their stock exchange. In addition, I am certain that Chinese stocks are at a discounted price as of now [for fundamentally strong businesses only]. 

With that i have accumulated quite a few positions for Chinese stocks and i will continue to add and find undervalue stocks in the Chinese market.

May the market be ever in your favour~

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