Short-term corrections in China’s stock markets could be a buying opportunity for investors, says a strategist at Bank of America Securities.
Winnie Wu, China strategist at the investment bank, acknowledged that there is still potential volatility from China’s evolving Covid situation and there could be more bad news if Covid cases rebound or real estate companies default.
“But you know, generally speaking, looking at the bigger picture, the worst in terms of corporate earnings, the disruptions, the Covid cases – they should be behind us in the second quarter now,” she told Street Signs Asia ” on CNBC on Wednesday.
Wu pointed to recent announcements such as reduced quarantines for international visitors to China.
“China is sticking to the zero-Covid policy, but we have seen some changes,” she said, adding that she hoped authorities would try to minimize disruption to residents’ daily lives.
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“Although we are seeing some recovery in Covid cases, [and] we’ve seen a few more cities start doing this mass testing, … I doubt we’ll go back to this extended lockdown that we went through in the second quarter,” she said.
Shanghai is conducting Covid tests in several areas this week after discovering new Covid cases, according to a statement on the city’s WeChat account.
Wu also pointed to Bank of America Securities’ so-called “bullish and bearish indicator,” which measures sentiment based on factors such as investment flows to predict the outlook for Chinese markets.
We advise investors to continue the rally and take these short-term corrections as buying opportunities.
Winnie the Woo
China Strategist at Bank of America Securities
This indicator is currently in a very bullish zone. On backtests, the very bullish zone signals a 100 percent chance the CSI 300 will rise in the near term, with average returns over the next two to six months in the teens, she said.
“So we remain positive. We advise investors to ride the rally and take these short-term corrections as buying opportunities,” she said.
Markets in mainland China have outperformed major global indexes over the past month, but were trading lower on Wednesday.
The Shanghai Composite closed 1.43 percent lower on Wednesday, while the Shenzhen Component fell 1.25 percent. The CSI 300 index, which tracks the continent’s largest listed stocks, lost 1.46% on the day.
— CNBC’s Evelyn Cheng contributed to this report.
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