Op MarketWatch:
Mark Haefele, chief investment officer at UBS Global Wealth Management, says China’s unexpectedly rapid dismantling of COVID restrictions is paving the way for a faster-than-anticipated economic reopening. UBS has upgraded Chinese equities to “most preferred” in Asia, at the expense of South Korea, and says select companies in the consumer, internet, pharmaceutical, medical equipment, transportation, capital goods and materials sectors are likely to see more front-loaded returns.
Onto the call of the day from Morgan Stanley, which in the same vein says it’s turned “even more bullish” on China. A team led by Laura Wang kept an overweight rating and raised their year-end target on the MSCI China index from 70 to 80. (The iShares MSCI China ETF (MCHI) ended Monday at $52.43.) It also lifted its China GDP growth estimate by three tenths, to 5.7%, which is ahead of the consensus 4.8%.
The market, the Morgan Stanley team say, is still underappreciating the far-reaching ramifications of reopening, and the possibility that a decent cyclical recovery can occur.
While there’s a visible rebound in mobility and offline entertainment, underappreciated improvements include more effective business communications and supply chain coordination, reduced uncertainty in investment and smoother implementation of public capital spending plans.
The Morgan Stanley team also expect countercyclical easing to remain in place in the first half, and even the beleaguered housing sector to see sales turn positive in the early second quarter.
Buy large-cap, highly liquid Chinese internet companies with a preference for Alibaba (BABA), the Morgan Stanley team say. “Despite the recent rally, we believe global investors have yet to build enough exposure to Chinese equities, particularly for the global long-only funds,” they said.