Mainland China is expected to engage in a prolonged and difficult process of inventory clearance in the next two or three years that will suppress an economic rebound next year, the Hong Kong Economic Journal reported Wednesday.
Citing Ning Jing, a fund manager at Fidelity International Ltd., the report said companies with poor performance will face more pressure in the areas of funding and requirements for environmental protection.
Meanwhile, better-performing companies will secure a stronger foothold that will differentiate the good from the bad, making it easier for stock pickers, Ning said.
However, certain sectors with an unclear business model are overvalued, as their development in the next five to 10 years has been factored into stock prices.
Ning expects increasing volatility in the renminbi exchange rate now that the Chinese currency has been included in the Special Drawing Rights basket of the International Monetary Fund, with bonds denominated in renminbi potentially rising in importance in the medium to long term.
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