For all the angst over Chinese capital outflows, MSCI’s China stock index ended the first half of 2022 down 12%, comparing favourably with the S&P 500’s 20% fall.
One reason was a June bounce, driven by the easing of COVID lockdowns. With officials pledging support for markets and the economy, and easing their tech sector crackdowns, investment banks are again rushing to slap Buy labels on Chinese shares.
There are headwinds, including the possibility of Western sanctions down the road and more property sector defaults. Long-awaited policy easing may be slow in coming, given the rest of the world is in rate-hike mode.
Still, with Western and emerging market stocks reeling from rate hikes and inflation, China may be in for an upbeat H2.