(Bloomberg) – JPMorgan Asset Management is doubling Chinese tech stocks after a tumultuous selloff, betting that loosening regulatory repression and attractive valuations will pay off well.
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Rebecca Jiang, who co-manages three Chinese equity funds with assets of nearly $ 20 billion, said she was becoming more optimistic about the industry as regulatory barriers were overcome and macroeconomic policies offered support. China’s flagship fund acquires shares in Alibaba Group Holding Ltd. and JD.com Inc. this year, according to deposits in late May.
“A clearer and more defined regulatory framework around these Internet businesses is definitely positive,” Jiang said in an interview in Hong Kong this week. “The worst is over,” he said, adding that the company has maintained most of its technology holdings in China over the past year as the industry provides “critical value” to customers.
Her views echo a growing trend in the Chinese market, where investors are returning to tech stocks after a year of strong sales that lost nearly $ 2 trillion at the height of their failure. And with the Chinese authorities ending their efforts to revitalize the economy, the country’s stocks have attracted buyers even as key indexes around the world fell into bear markets.
China’s CSI 300 benchmark gained more than 5% last month, while the S&P 500 fell about the same and the MSCI global stock index fell nearly 6%. The Hang Seng Index of Chinese tech stocks, meanwhile, rose more than 10% during the period as authorities signaled a softer stance on the industry.
China’s outperformance is due to loose monetary and fiscal policy adjustments, even as global central banks, led by the Federal Reserve, rush to raise interest rates to curb hot inflation. China’s political determination was reaffirmed as President Xi Jinping, in a keynote address at a virtual BRICS business forum on Wednesday, pledged to meet the financial goals for the year.
From Morgan Stanley strategy analysts to the Jefferies Financial Group, the drum of upward rhetoric for China is getting stronger day by day, with Deutsche Bank AG saying on Wednesday that it expects to upgrade its market view the next months. More fiscal stimulus is likely before President Xi Jinping secures a third term later this year, according to money managers in the German lender’s private banking unit.
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Certainly, betting on high technology has led to losses. Jiang’s fund in China lost 20% last year, falling into the top spot after finishing in the top 5% of its bonds in 2020. Although it is still about 20% lower this year, its most recent returns have begun to turn positive.
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“Development strategies have gone through a difficult period,” Jiang said. “But regulatory headwinds and austerity could be a blessing in disguise for many of these Internet companies. “I think that helped investors recognize and appreciate their true values.”
Moving forward, Jiang said she was looking at opportunities in other damaged sectors such as property, as well as policy makers, including infrastructure and new energy.
Real estate regulations can “accelerate market integration and market share gains, especially for top more conservative state developers,” he said, adding that mutual fund increases distribution in the sector.
The gradual easing of restrictions for Covid, combined with continued monetary and fiscal support, means that Chinese stocks will continue to perform better than their global counterparts for the rest of the year, according to Jiang.
“Both in terms of the global distribution of assets and on an individual basis, the Chinese assets, the stocks we are talking about here look attractive, especially from the level that has fallen.”
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