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Constructive outlook for Chinese equities in 2023

20-01-2023 · Yearly outlook

Constructive outlook for Chinese equities in 2023

China’s dramatic policy pivot in late-2022, embracing a pro-growth agenda and abandoning zero-Covid, has set up its battered equity markets for a sustained revival.

    Authors

  • Jie Lu - Head of Investments China

    Jie Lu

    Head of Investments China

  • Helen Keung - Client Portfolio Manager

    Helen Keung

    Client Portfolio Manager

Top keywords

Summary

  1. Pragmatic, pro-growth pivot demonstrates policy flexibility

  2. Confidence in the property market, and not Covid, the key swing factor

  3. Subdued valuations still offer a clear entry point for long-term investors

The move has shattered the narrative among China skeptics that political leaders had ushered in a repressive economic ice age. The flexibility demonstrated in the fourth quarter of 2022 has in our view set China up for growth in 2023, after three years of stagnation and uncertainty.

The road ahead remains challenging, with confidence in the property market still absent and the disruption caused by the country’s sudden Covid exit strategy making headlines. Nevertheless the pragmatism and comprehensive nature of the 2023 policy prescription has justified our confidence that the worst was indeed over for China by Q3 2022.

We are upgrading our outlook for China to constructive based on our five-factor model, with a confluence of macroeconomic pro-growth pivots such as expansionary fiscal policy, the potential for further monetary policy easing, China reopening, and comprehensive policy support for the property sector. With valuations in key sectors still at historical lows and investor sentiment recovering, we believe it’s an appropriate time to increase exposure to Chinese equities, through an active investment strategy.

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Market outlook

This is how we summarize the current outlook for investors in China based on our five-factor model.

contructive-outlook-for-chinese-equities-in-2023-fig1.jpg

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Important information This disclaimer applies to any documents and the verbal or written comments of any person in presentations or webinars on this website and taken together is referred to herein as the “Information”. The services to which the Information relate are NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws and must not be relied or acted upon by any other persons. This Information does not constitute an offer to sell, or a solicitation of an offer to buy, any financial product, and may not be relied upon in connection with the purchase or sale of any financial product. You are cautioned against using this Information as the basis for making a decision to purchase any financial product. To the extent that you rely on the Information in connection with any investment decision, you do so at your own risk. The Information does not purport to be complete on any topic addressed. The Information may contain data or analysis prepared by third parties and no representation or warranty about the accuracy of such data or analysis is provided.
In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management UK Limited (“RIAM UK”) is authorised and regulated by the Financial Conduct Authority. RIAM UK, 30 Fenchurch Street, Part Level 8, London EC3M 3BD (FCA Reference No:1007814). The company is registered in England and Wales under Ref No. 15362605.

In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management B.V. is authorised as a manager of UCITS and AIFs by the Netherlands Authority for the Financial Markets and subject to limited regulation in the UK by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.