Fund management titans BlackRock and Invesco back Chinese stocks even as Citigroup and UBS make bearish calls

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Zhang Shidong & Mia Castagnone at

Two major US fund managers have reiterated their positive views on Chinese stocks despite this year’s weak performance and are betting on policy support to underpin a strong second half, even as major investment banks slash their targets for key equity benchmarks.

BlackRock, the world’s biggest asset manager overseeing US$8.6 trillion, has an overweight position on China and other emerging markets, citing attractive valuations and policy support expectations. Meanwhile, US money manager Invesco, which has US$1.5 trillion in assets under management, expects government infrastructure spending to drive outperformance by Chinese stocks in the second half of the year.

The upbeat calls by the two prominent money managers may instil some confidence in China’s stock markets, which have been regional laggards in the year to date. Chinese stocks and the yuan currency have been pressured by weak economic data and their underperformance reflects investor frustration over the lack of any meaningful steps to support growth in the world’s second largest economy.

“Valuation is attractive in China,” said Ben Powell, chief investment strategist for the Asia-Pacific region at BlackRock Investment Institute, at a briefing in Hong Kong on Thursday. “Over the next several weeks, you may see more evidence of policy loosening, as we head into the key Politburo meeting towards the end of July.”

Thus far, policymakers have refrained from any big moves after making small 10 basis-point cuts in policy rates and in benchmark borrowing costs, prompting research teams at Citigroup and UBS to lower their year-end forecasts for Chinese stocks.

The CSI 300 Index of onshore stocks is valued at 11.9 times estimated earnings this year, compared with the past decade’s average of 13.4 times, according to Bloomberg data. The gauge has lost about 1 per cent so far this year after the reopening trade, spurred by the removal of the zero-Covid policy, lost steam.


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