Marko Papic, partner and chief strategist at Clocktower Group, said that Chinese stocks are expected to rise by at least 10% in the near future as government authorities show their support efforts. Papic cited Bloomberg’s report that Chinese President Xi Jinping was to be briefed by financial regulators about the recent stock market downturn. The Chinese securities regulator has also made public statements to boost investor confidence, including announcements of state-backed purchases.
“If you’re willing to meet, to help with stocks, then why wouldn’t [you] do something to help stabilize growth?” Papic said. He mentioned that it would be “very strange if the Chinese focused on stabilizing equities, not the fundamental macro economy.” While Beijing has refrained from implementing large-scale stimulus, ongoing tensions with the U.S. and other factors have led to record low consumer sentiment. However, Papic noted that Chinese stocks may have reached a turning point and could see a 10% to 15% rally in the coming trading days.
Papic acknowledged that his previous bearish outlook on Chinese stocks may change and that the recent rally “could be a dead cat bounce,” but he believes that the Chinese government’s willingness to support the stock market is a step in the right direction. He also mentioned that Clocktower assists in deploying foreign capital into China and that the upcoming Lunar New Year holiday may affect market dynamics.
Jeremy Stevens, Asia economist at Standard Bank, expressed caution, pointing out that similar interventions in 2015 did not produce the intended results, resulting in a major stock market downturn. Looking ahead, he noted that China’s economic growth is expected to decline without the positive effects from the previous year and will closely monitor policymakers’ decisions at the National People’s Congress in March.
