Chinese stocks outlook 2023: Treading carefully amid fragile sentiment | Equities

Investors are revisiting Chinese equities going into 2023 as the country gradually reopens and economic activities normalise. But a bottom-up approach is necessary along the road of China’s bumpy recovery, fund managers say.

In a major policy shift, China dropped its zero-Covid approach in early December, ending the country’s year-long massive lockdown and testing mechanism in favour of self-testing and home quarantines for asymptomatic and mild cases. As infections surged in the cold-weather central and the northern areas, including Beijing, however, economic activity has also seen some disruption.

Paul Kalogirou, head of client portfolio management for Asia at Manulife Investment Management, noted that global investors’ allocation to Chinese equities is dependent on the level of domestic mobility and consumption as the economy recovers.  

“The first one to three months going in winter is going to be pretty disruptive towards the economy as China reopens. So, we’re not going to see until second quarter next year in terms of transparency around those mobility and consumption levels, but obviously markets could react before that if [macro] data starts to get better,” said Kalogirou.

Overall, the market expects China’s reopening to gain meaningful momentum after March 2023, as the weather warms and more policy direction is given during the national legislative meeting, or Two Sessions, that month.

“It’s a case of being…