While many of the risks are known, most Chinese stocks remain close to oversold, Lim said. added.

Chinese Premier Li Keqiang He urged leaders of key provinces to “take on greater responsibility” in stabilizing the faltering economy as they visited Shenzhen’s southern tech hub on Tuesday. We have lowered key interest rates and lowered both our one-year medium-term loan facility and seven-day reverse repos by 10 basis points.

Lim said the latest policy move in a pivotal year will support equities, especially after the crackdown the authorities have implemented over the past few years.

For now, Beijing’s zero Covid approach remains a headwind for the market.But consumption could ‘rebound’ once the Chinese government finally eases this policy. [as] When people open their wallets, there is a positive upward spiral in terms of the multiplier effect,” he added.

Some market participants are arguing that China’s economic recovery will remain weak for the rest of the year, given July’s many worrisome economic data. Retail sales and industrial output slowed more than expected last month and youth unemployment hit a record high.

Montreal-based BCA Research strategists, including Arthur Budagyan, said in a note issued Wednesday that the “combination of real estate market woes, imminent export contraction and dynamic zero-corona policy has pushed the current stimulus package’s multiplier down. It will be less effective,” he said. “It is therefore likely that no meaningful recovery in economic activity will materialize in the coming months.”

“China’s recovery will be U-shaped instead of V-shaped, with risks tipping to the downside. Consistently, the risk-reward of Chinese equities remains low,” he said.

Carlos Casanova, senior economist for Asia at Union Banker Privé, agrees. He expects the economic recovery to slow down for the rest of the year as policymakers take steps to stabilize growth.

“The authorities will maintain an accommodative monetary policy stance, increase fiscal spending, implement more targeted macroprudential measures to control risks in the housing sector, and adopt a more flexible ‘dynamic policy’ in the fourth quarter. We hope to turn to a zero-Covid policy,” Casanova said. .

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