(Bloomberg) — Global fund managers are tamping down expectations ahead of China’s Politburo meeting, with many bracing for prolonged gloom in the stock market on bets that any policy support will lack potency.
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Chinese stocks notched its worst week in four despite a series of vows to boost consumption and businesses, underscoring deep market skepticism. While the high-level economic policy meeting slated for next week should unveil further measures to revive spending and the ailing property sector, investors see no easy fix to the lack of confidence plaguing the market.
Beijing faces the dilemma of ensuring the economy achieves its roughly 5% growth target, while refraining from the type of all-out stimulus that may yield asset bubbles. With a broad rally seen unlikely, money managers are choosing to focus on more specific opportunities within sectors including Internet, consumer discretionary and energy transition that align with policy goals.
The “market is pricing some continued policy support, but no bazooka-like stimulus,” said Kevin Net, head of Asian equities at LA Banque Postale Asset Management in Paris. “It’s best to focus on the fundamentals, in particular the sectors and stocks that will benefit from government support and help China gain more self reliance.”
READ: Xi’s Big Private-Sector Push Runs Into Wall of Skepticism
The CSI 300 benchmark of mainland shares fell 2% this week even as officials released 31 measures to improve conditions for private business and are considering easing home buying restrictions in the nation’s biggest cities. The Hang Seng China Enterprises Index lost 2.2%, firming its status as one of the year’s worst performers among 92 major gauges tracked by Bloomberg.
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Key Chinese indexes are down for the year, losing out on a rally seen across Japan, India and the US. While not a game changer, the Politburo meeting will offer some tactical trading opportunities.
“I would watch for rhetoric that aims to boost private sector confidence and a combination of stimulus,” said…
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