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Chinese stocks are due for an 8% rebound as market nears bottom, UBS says

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After bad news for Chinese stocks and yuan, a market turnaround is not far away for UBS as data improves

China’s equity market ‘may have bottomed out,’ UBS strategist Wang says, citing historical signalsPrices rebounded 8 per cent on average three months after large or excessive selling in the onshore stock market in the past: UBSChina stock marketJiaxing LiPublished: 3:00pm, 20 Sep, 2023Why you can trust SCMP

Investors should be more optimistic about China’s market outlook because Beijing’s efforts to stimulate the economy are producing results, while technical signals suggest the stock slump since the start of the year is almost over, according to UBS Investment Bank.

“We see several signs which historically would have suggested that the equity market may have bottomed out,” James Wang, head of China strategy based in Hong Kong, said in a report. “We see reasons for more optimism.”

UBS said economic fundamentals have improved, citing manufacturing and credit impulse. Measures to boost home sales, trim equity trading costs and cut personal income tax have exceeded investor expectations while increased talk between state officials have helped ease geopolitical tensions, he added.

The CSI 300 Index tracking the nation’s largest companies listed in Shanghai and Shenzhen has slipped 1.5 per cent this month and 4.1 per cent this year, approaching an 11-month low. Foreign funds sold US$2.1 billion of Chinese stocks last week, taking the six-week outflows to a record US$15 billion, according to Goldman Sachs.

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