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JPMorgan’s Marko Kolanovic Calls Chinese Stock Sell-Off a Buying Opportunity

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  • Chinese stocks crashed on Monday after Xi Jinping cemented his third term of power over the weekend.
  • JPMorgan’s Marko Kolanovic called the Chinese sell-off “disconnected from fundamentals.”
  • “We believe this is a good opportunity to add given an expected growth recovery,” he said.

Chinese stocks plunged on Monday after President Xi Jinping cemented his power in the Communist Party and secured a third five-year term, but JPMorgan views the decline as a buying opportunity.

Shares of Alibaba, Tencent, and other Chinese tech giants fell more than 15% to multiyear lows as investor concerns grow that the country is moving away from policies that are viewed as friendly to the economy, markets, and businesses. 

The Nasdaq Golden Dragon China Index wiped out more than $130 billion in market capitalization as it fell as much as 21% on Monday, according to data from Bloomberg.

The fear of China’s new attitude towards the markets and economy was in part sparked by the removal of Premier Li Keqiang from leadership, as he has been an advocate of market-style reform and private businesses.

“A faction within the Chinese Communist Party has taken control of the party, and therefore the state. There are no centers of power that can challenge him. The direction China is moving is more nationalistic, less interested in market reforms, and more strident in its desire to challenge the international order,” Marc Chandler, managing director at Bannockburn Global Forex, wrote in a note Monday.

But JPMorgan chief global markets strategist Marko Kolanovic is unfazed by Monday’s decline, calling the sell-off “disconnected from fundamentals” and a buying opportunity for investors in a Monday note.

He is ultimately betting that the Chinese economy will experience a recovery in growth as the COVID-19 pandemic begins to fade.

“China growth data surprised positively over the weekend, but their equity market is selling off strongly today. We believe this is a good opportunity to add given an expected growth recovery, gradual COVID reopening, and monetary and fiscal stimulus,” he said.

The data referenced by Kolanovic is China’s delayed weekend release of third-quarter GDP, which grew by 3.9% compared to the prior year. That figure beat expectations of 3.2% growth, and represented a reacceleration from the second-quarter’s GDP growth of just 0.4%. But it fell short of the Chinese government’s GDP target of 5.5%.

Still, there are signs that China’s economy is dealing with ongoing headwinds as it reels from the effects of rolling COVID-19 lockdowns and a lingering crisis in its real estate market.

Tesla reduced the prices of its Model 3 and Model Y vehicles by as much as 9% in China on Monday, signaling that demand could be waning. CEO Elon Musk said during the company’s third-quarter earnings call last week: “China is experiencing a recession of sorts.” 

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