Chinese investors are placing bets on position on thesis that the market has already bottomed out and forecasting gains of 4% to 5% by the end of June.
According to Bloomberg’s survey of 21 fund managers and analysts based in China and Hong Kong – 43% responded that they believe A-shares have reached a trough while another 33% believe the market is to bottom out this quarter.
Bloomberg’s surgery suggest a growing number of market participants strongly believes that the sharp rebound following a mid-March rout is expected to have marked the beginning of an eventual turnaround.
The market got sentiment boost earlier after Chinese authorities repeatedly vowed to support the financial markets. However, renewed concerns about rising COVID-19 infections are posing a challenge on the outlook.
For the year-end, the survey points to around 11% gains for the former and 14% for the latter.
Chinese tech stocks have been under pressure this year with regulatory risks at home as well as abroad -risk from getting removed from American exchanges as authorities dismay on audit rules. However, some investors believes with Hang Seng Tech Index down by 60% from 2021 peak – the worst is behind or almost over, citing cheap valuation will lure dip buyers.
Renewables, hardware tech and energy sectors were seen as most likely to outperform among A-shares this quarter, while healthcare and internet firms were the most favored among H-shares.
According to the survey. both onshore and offshore, real estate and financials were the least favored. This suggests traders don’t expect the recent rally in the two sectors to have legs, with a Shanghai gauge of property developers up 28% from a low in mid-March.
In terms of risks, the worsening COVID-19 situation along with Beijing’s “zero-COVID” policy remains as headwind. Concerns of slower-than expected economic recovery, bilateral tensions with U.S. and potential delisting from American exchanges add to the concerns of investors.