Chinese Shares 2018: Analysts Bet On Chinese Stocks After Central Bank’s Shift

Chinese Shares
Analysts from two financial firms bet on the potential of Chinese shares, saying that now may be the best time to buy the stocks.
(Photo: REUTERS/Aly Song)

Analysts concurred that Chinese shares provide good investment opportunities if investors buy them now following measures from the country's central bank aimed to enable growth following sell-offs in the past weeks.

Analysts from Japanese-based trading firm Chiba Taiko Partners and San Francisco-based Matthews Asia stated in separate published notes that Chinese market now has the plethora of appealing shares to jump right on for investors.

Chiba Taiko noted that Chinese Central Bank has previously tightened its monetary policies and now is showing potential for a steady pace of returns for its equity markets. The analysts added that Chinese shares may be headed for an extremely bullish market throughout the year due to the anxiety on China-US trade war, but, the smoke has started to clear now.

One chief analyst at Chiba Taiko said there are now lots of companies which are undervalued and therefore make for attractive and prime acquisitions.

Of more particularly promising are the quality technology-based stock companies that now possess extremely attractive prices, highlighted Jack Edmonds, the associate director of Chiba Taiko. He said there are companies that would be trading 30-to-50-times earnings that would now trade at 20. Edmonds added that it seems like forecasts on a big rally loom in the coming weeks.

Robert Horrocks, chief investment officer at Matthews Asia, said his firm is betting on Chinese stocks by buying numerous A-shares throughout 2018. Matthews Asia will carry on adding Chinese equities to its portfolios by reducing their acquisitions in other Asian markets such as India. Matthews Asia is betting based on central bank's decision to start to loosen its monetary policy.

Horrocks added that there may still be some indications of volatility and weaker markets in the early months of 2019 due to tough U.S. monetary policy which would continuously drag on the S&P 500 index and Asian equities.

Meanwhile, on Nov. 6, China's central bank announced that it lent $58.37 to financial institutions, Reuters reported. The loan will be available through a 1-year medium-term lending facility. The leaves rates at about 3.30 percent are unchanged. The central bank, however, did not give new funding through the liquidity tool as loans through this channel are about to expire on the same day the announcement was made.

China's central bank is also set to trial new regulations that would implement tougher policies on financial holding companies such as Alibaba's fintech affiliate Ant Financial Service, China Merchants Group, Shanghai International Group, and Beijing Financial Holdings Group.

If the trial is successful, the central bank will implement a policy that would supervise financial services by the first half of 2019.

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