Mainland China equities will be one of the key investment themes in Asia this year amid uncertainties surrounding the global economy, a strategist at HSBC said.
Beijing’s reforms will bring about investment opportunities and boost the mainland stock markets, said Herve Lievore, senior macro and investment strategist at HSBC Global Asset Management.
Despite a 50 percent surge in 2014, China’s A-share market is still attractive in terms of valuations compared with bourses elsewhere, the Hong Kong Economic Journal cited Lievore as saying in an interview.
“The People’s Bank of China is expected to keep its monetary loosening policies, including reduction in lenders’ reserve requirement ratios and cut in interest rates,” said Lievore.
The Shanghai-Hong Kong Stock Connect and the anticipated inclusion of A-shares into MSCI Indexes are other factors that may drive money into mainland markets, he said.
However, Lievore warned about default risks in certain projects invested by local governments as they try to meet growth targets.
The projects, which have poor profitability, may go bust when the country pushes for further deleveraging. Slower economic growth will add to the problems.
In other comments, Lievore said he expects the renminbi to remain in the range of 6.15 to 6.20 to the US dollar by the end of this year.
Translation by Vey Wong
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