Analysts remain unfazed by recent Chinese stock market dip
May 27, 2019 (China Knowledge) - Chinese stocks have taken a hit this month amid a re-escalation of the Sino-US trade war with the benchmark Shanghai Composite Index now down 13% from its April highs, wiping out more than USD 1 trillion in market capitalization.
Despite this, analysts from HSBC Jintrust Fund Management and Hengsheng Asset Management remain unfazed, viewing the recent dip as a potential buy-in opportunity as the Sino-US trade dispute has mostly been priced into stock prices with the possibility of a deal still on the table.
These analysts are now keeping a close watch on sectors such as finance, technology, food & beverage, retail and agriculture where demand is largely domestically driven while avoiding companies that are heavily exposed to overseas sales.
In addition, as the current trade war places a drag on the country’s economic growth, there are also expectations that the government will loosen policies to avoid a economic slowdown with another cut to reserve ratio requirements expected to come this year.
Overall, the Chinese stock market is operating on much better fundamentals and liquidity compared to last year with possibility opportunities within the short and medium term should extremely low valuations occur.
Moving forward, the Chinese stock market will likely enter a sideways trend until fundamentals improve again and a clear direction for the Sino-US trade talks emerges.
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