BEIJING, CHINA – Chinese stocks are anticipated to soar by a minimum of 10% in the near future, following reassurances from authorities signaling a collective effort to provide support. Marko Papic, partner and chief strategist at Clocktower Group, is optimistic about the potential for a significant rally in Chinese equities after reports that Chinese President Xi Jinping was set to discuss the recent stock market turmoil with financial regulators.
Papic highlighted the Chinese securities regulator’s public statements in recent days aimed at boosting investor confidence, including the announcement of state-backed purchases. He emphasized that it would be unusual for China to prioritize stabilizing stocks over the fundamental macro economy, calling attention to the country’s current economic challenges.
Despite lingering tensions with the U.S. and a sluggish recovery from the pandemic, Chinese stocks surged following a five-year low on Monday. Papic expressed a significant shift in sentiment, indicating a potential turnaround in investor confidence. However, he acknowledged the possibility of a temporary recovery, cautioning investors against prematurely diving back into the market.
It’s worth noting that Chinese stock markets are set to close for the weeklong Lunar New Year, leaving uncertainty about the extent to which Chinese authorities are prepared to intervene if necessary. With expectations of ongoing economic challenges and the impending National People’s Congress in March, market observers are closely monitoring the government’s policy focus and growth targets.
Overall, the potential for a substantial rally in Chinese stocks has piqued the interest of investors and market analysts. The implications of renewed government support and ongoing economic challenges present a complex landscape for both local and foreign investors. While the short-term outlook appears optimistic, the long-term trajectory of Chinese equities remains uncertain amidst broader economic and geopolitical factors.