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China’s stock market has rebounded, and analysts say the rally is likely to continue.
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Two major economic indicators are showing positive signs that Chinese stocks have bottomed out.
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After six months of capital outflows, foreign investors are gradually starting to pour money into activities in China again.
China’s stock market may have shed its “uninvestable” label on the back of an economic recovery and potential for plenty of upside.
LPL financial strategist Adam Turnquist wrote this week that long-standing bearish views on China’s real estate and stock markets are shaking investor confidence. However, recent positive economic indicators suggest the country’s economy is “coming up from the bottom.”
“As is often the case, extreme sentiment often works well as a contrarian signal, often seen at important inflection points in markets,” Turnquist wrote in a note Thursday.
The MSCI China Index, the go-to for global investors focused on mid- and large-cap stocks, rebounded with a solid 20% gain from its bear market lows.
“About a third of the stocks hit four-week highs last week, and nearly 50% were above their 200-day moving averages, their highest since August,” he said.
The Percentage Price Oscillator, another momentum gauge that compares an asset’s current price with its past performance, recently issued a buy signal, adding further weight to the argument that the rally could move higher. Ta.
China’s recent reputation as “uninvestable” has been compounded by mounting real estate troubles, a plunging stock market, and dire consumer demand that has sent the country into a deflationary spell.
However, after six consecutive months of capital outflows, foreign investors are returning and pouring money into the domestic market again.
“Northbound flows between Hong Kong and mainland China stock exchanges have been positive for three consecutive months, with nearly 100 billion yuan flowing into mainland stocks since February,” the note added.
Since early 2024, the Chinese government has rolled out measures to stimulate the market and economy, including restricting short sales and encouraging new real estate development approaches while ramping up construction efforts. It will be done. The country’s economy grew by 5.3% in the first quarter of 2024.
Billionaire investor Ray Dalio said in March that now was the best time to invest in China because it was cheap, but that the country had some major economic challenges and was a “once-in-a-century storm.” He warned that there was a possibility of heading towards “.
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