Despite a 10 percent correction in mainland equities over the past two months, driven by a slew of concerns from Beijing’s crackdown on property speculation to rising local government debt levels, China market bulls are not giving up hope, forecasting gains of up to 15 percent in the coming months.
The world’s second largest economy’s disappointing first quarter gross domestic product (GDP) growth of 7.7 percent, coupled with benign inflation, is lessening the risk of policy tightening that has been weighing on the market, say strategists.
“People were pricing in tightening risks and hence there is a discount in [stock market] valuation. With slower growth and lower than expected inflation, that risk is being pushed out. [While] sentiment is pessimistic, this is the better time for entry,” said Wendy Liu, head of China equity research at Nomura. The country’s consumer price index eased sharply in March to 2.1 percent from 3.2 percent in the previous month.
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