'Signs of life' in China's markets as supportive measures boost confidence, forum told

Global investors' pessimism about China may no longer be well placed, as policies designed to bolster confidence are likely to spell better times ahead for the market, senior financiers told a conference.

"Suffice to say the past few years have been the darkest period for China investors, [but] this story has started to change," said Steven Sun, head of research at HSBC Qianhai Securities.

Regulators have been strengthening their efforts to lift the market's performance in recent months. A record 400 billion yuan (US$55 billion) has flowed into exchange-traded funds (ETFs) tracking major indices this year as state-owned funds dubbed the "national team" went back into action, while a tightening of the rules governing initial public offerings (IPOs) have improved the liquidity situation, according to Sun.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

Past market failures, including the recent slump in January this year, the US$5 trillion meltdown in 2015 and the global financial crisis in 2008, have all given Beijing the impetus to focus more on investor returns, Sun said.

"The whole purpose really is, you know, for the capital market to achieve its role of allocating capital relying on market-driven forces," he said.

One of the key criticisms from global investors is that the major stock indices are not acting as barometers of China's economy because the market is diluted after excessive listings, said Robert Li, senior director and client portfolio manager of equities at Barings, a global investment company. That means long-term allocators are not willing to commit as much capital because they need to put in extra work to identify good investment targets.

"The new policies are geared towards [fixing] that, and we would like to see that," Li said.

Sun and Li were speaking at the "Unearthing Investment Opportunities" session of the South China Morning Post's China Conference on Thursday. The forum has brought scores of decision-makers to the city to discuss the opportunities and challenges in the world's second-largest economy.

The outlook for the second half of the year is looking brighter as Beijing takes action to stabilise and enhance the market. Companies that have a global presence are set to continue to grow, while high-dividend stocks from the more traditional sectors offer investors who are less optimistic a more defensive bet, they said.

To be sure, Beijing's measures so far have mainly focused on the supply side, and it will still take time for domestic demand and confidence to recover as expectations of low wages persist. Global investors are also yet to allocate more capital to China strategically or from a long-term perspective, according to Sun.

"But the current valuation has certainly priced in a lot of negative scenarios," Sun said. "We're seeing more signs of life."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.