Chinese Markets Poised for Significant Upswing, Expert Predicts
Despite widespread skepticism, China’s equity market and currency are primed for a substantial rally, according to Stephen Jen, CEO of Eurizon SLJ Capital. The recent stimulus package implemented by the Chinese government has created a perfect storm for investors, who are currently underexposed to Chinese assets.
Jen believes that Chinese equities are severely undervalued, making a significant upswing entirely plausible. This sentiment is shared by other prominent investors, including billionaire David Tepper, who have expressed optimism about China’s economic prospects.
The CSI 300 index has already experienced its largest gain since 2008, yet many investors remain bearish, with nearly 20% of global fund managers surveyed by Bank of America Corp. identifying shorting Chinese stocks as a popular trade. However, with the Federal Reserve cutting interest rates and oil prices remaining low, Jen expects risk assets to perform exceptionally well.
Looking ahead, Jen predicts a powerful rally in global equities following the US election, driven in part by a decline in the US dollar against the euro, yen, and yuan. As US inflation slows and the economy experiences a soft landing, Jen’s “dollar smile” theory suggests that the greenback will trade lower against other major currencies.
With China’s stimulus measures taking hold, investors may be wise to reassess their exposure to Chinese assets, which could lead to a significant shift in market sentiment in the coming months.
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