Investment managers warm on China policy announcement

Mike Taylor

Managing Editor/Publisher, Financial Newswire

1 October 2024

Investment managers are showing renewed positivity around China in the wake of the nation’s recent policy easing measures, with both Amundi and Principal Asset Management suggesting the changes may prove pivotal.

Principal Asset Management chief global strategist, Seema Shah suggested that the news out of China had been received with cautious optimism.

At the same time, Amundi’s Investment Institute team said it had become “cautiously optimistic” about Chinese assets following the announcement.

“The monetary easing and housing policy adjustments signal a renewed effort by China’s leadership to support the economy, but they still seem unlikely to single-handedly reverse the structural economic slowdown,” The Amundi team said.

“While these moves should help stabilise market sentiment in the short term, the real test will come from whether fiscal measures follow, a consumer-oriented fiscal package could be a true game changer in stimulating household consumption and addressing deflationary pressures.”

“We believe Chinese equities – specifically onshore A-shares and select Hong Kong stocks – will benefit the most from these policy shifts. “The significant gap between earning yields and bond yields presents an attractive opportunity for equity investors. Moreover, a stabilising housing market, combined with improved household expectations, could provide further tailwinds for equities.

Principal’s Shah said China’s fiscal pledge announcement suggests that policymakers have recognized that the lingering property rout and indebted local government require meaningful fiscal expansion—and that monetary stimulus should prove to be most effective if it is working in conjunction with fiscal stimulus.

“Ultimately, provided the magnitude of the fiscal measures is sizeable, and policymakers proactively and sufficiently target rejuvenating the property sector, prospects for China’s economy are likely to improve.

“This week may mark a pivotal moment for China—but it all comes down to the details,” Shah said.