While China stock bulls had another miserable year, their fortunes may finally improve in 2023 if the nation’s abrupt reopening from Covid curbs eventually leads to a robust economic recovery.
The Hang Seng China Enterprises Index, which tracks Chinese firms listed in Hong Kong, just suffered a third straight year of declines, a record losing streak since its inception in 1994. The slump in 2022 was accompanied by spiking volatility that was the worst since the global financial crisis and ranked the highest among major benchmarks in the world. Combined losses from stocks traded on the mainland and in Hong Kong reached $3.9 trillion.
“Market needs to be patient,” said Vivian Lin Thurston, portfolio manager at William Blair Investment Management. Sentiment toward Chinese stocks has room to improve further, but the process could be gradual and “with possible setbacks and volatility,” she added. Chinese shares staged an epic rebound in November, when Beijing started relaxing Covid restrictions and increased efforts to defuse debt risks among property developers.
Although the rebound has lost some steam in December on concerns that rising infections will disrupt economic activity, asset managers such as Amundi SA believe any dips are a chance to buy. China’s economy is expected to grow 4.8 percent in 2023, at a time when its global peers are grappling with the dual threat of elevated inflation and slowing growth. Beijing’s loose monetary policy, which contrasts with a hawkish Federal Reserve, as well as a softening stance on private businesses, may offer Chinese shares an extra tailwind.
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