The Shanghai Composite Index could bounce back and reach the 4,500-points level this year on the back of corporate earnings and the Chinese government’s “one belt, one road” initiatives, according to an executive at one of Hong Kong’s key pension and trust service providers.
Michael Ha, investment director at Bank Consortium Trust Co. (BCT), said he is hopeful that Chinese equities will recover significantly from recent lows, the Hong Kong Economic Journal reported.
However, he added that the Shanghai benchmark is unlikely to regain its June 12 peak of over 5,100 points any time soon, given the faster pace of deleveraging among Chinese investors.
Ha expects two more interest rate cuts in China this year. He noted that real interest rates in the country are still at a relatively high level.
Nonetheless, the A-share markets may see reduced direct participation by foreign investors, he said, citing concerns over government intervention in the market.
As foreign investors reduce their involvement in A-shares, Hong Kong’s H-share market could benefit in the long run, Ha added.
The recent stock rout was partly related to margin financing in the shadow banking system, said Alan Lok, director of capital markets policy for Asia Pacific at CFA Institute.
However, he said that it is still on a relatively small scale, compared to global levels.
In other comments, Lok said China’s curbs on over-the-counter financing in the stock market may have hurt foreign investor confidence.
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