Market Outlook | Papers

In China, economic results of late have largely been disappointing, with traditional headline indicators highlighting sluggish growth and mounting deflation risk. Our view is that China is experiencing the economic transition to a so-called “New Normal”, and the prevailing growth slowdown, gauged by traditional industrial-focused indicators, is both necessary and essential for the ongoing economic transformation. In this paper, we will discuss the key priorities of the reform agenda, along with the Chinese government’s progress in implementing these reforms to date. In the last section, we will discuss the nascence of this round of the bull stock market and the recent massive correction, along with our short-term and long-term expectations. The bottom line is that we are positive on China’s economic reform and the government’s efforts in supporting capital market reform. We also believe that there will be more upside in Chinese A-shares, but that the next leg will be characterized by extreme volatility.

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