After consolidating for the past couple of quarters, China A shares are likely to benefit from a recovery in China’s economy, writes Michelle Qi, Head of Equities at Eastspring Investments. The asset manager is bullish on China’s manufacturing sector which presents an opportunity owing to low valuations.
“The challenges faced by China’s economy in the last 12 months are well documented. Heading into the second half of the year, we believe that there is a compelling case for China A equities,” writes Qi. The investment management firm argues that low inflation in China will keep financing costs low, stimulus measures will support the economy and the trade surplus aids these efforts amid rising costs.
Eastspring says that negative earnings revisions in China have slowed down with earnings growth forecasts for a loss down by 28% from their recent peak. The asset manager believes Chinese firms may give an earnings surprise.
Read more at eastspring.com.