Chinese equities will extend their rout by as much as 35 percent, taking the Shanghai gauge to half of last month’s peak, according to George Magnus, a senior independent economic adviser to UBS Group AG.
“We’re going back to where we came from,” Magnus told Bloomberg TV from London on Thursday. “The Shanghai Composite is going to go all the way back down to around 2,500-2,800,” he said. The measure closed at 3,823.18 on Thursday, after tumbling 26 percent since June 12.
Magnus said he’s bearish on Chinese shares because their rally was never justified amid a weaker economic outlook. While the stock-market boom boosted growth in the six months through June, real estate languished and agriculture grew at about half the overall economy’s 7 percent pace. Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, says China’s slowdown in the coming years may spur a world recession.