Chinese Equities; Marching to a Different Drum

If you thought the sell off in Chinese equities last week was simply a reaction to the global rout in equities after the volatility spike, then think again, writes Gavekal Dragonomics. In fact Chinese equities did worse. But why? To be sure the global sell-off was an aggravating factor in the mainland’s market meltdown, it was not the trigger, Gavekal say in the report. Instead the slide in Chinese stocks owed more to heightened local investor anxiety over Beijing’s new financial regulations, exacerbated by a crackdown on leveraged buying. When the regulatory dust settles, which is likely after the coming week’s Lunar New Year holiday, benign fundamentals and attractive valuations should come to the fore again, with Chinese stocks resuming their upward march, the report concludes. Click below to request trial access to read this report or to request samples.