China’s stocks are likely to bounce back in the second half of the year as supportive government measures boost earnings growth and as valuations dented by economic pessimism bottom out, according to UBS Group and China Asset Management.
A recovery in corporate earnings may drive an average 10 per cent gain in Chinese stocks by the end of the year, UBS said. Battered valuations, an easing of geopolitical tensions and a predicted end to US interest-rate rises provide fertile ground for an uptick in equities, according to the Hong Kong unit of China Asset Management that oversees 1.23 trillion yuan (US$171.9 billion) of assets.
“The market is probably overly pessimistic and most of the slowdown in growth has now been priced into stocks,” said Meng Lei, a Shanghai-based strategist at UBS, during an online briefing on Tuesday. “Actually, excessive pessimism offers investors a very good opportunity for positioning.”
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