(Bloomberg) -- The past year’s deep selloff in Chinese stocks could finally be on the cusp of a turnaround, says JPMorgan Chase & Co. strategist Marko Kolanovic.
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“Chinese equities may have reached their turning point as lockdowns begin to ease, growth support measures continue, and news reports that China is about to conclude its probe into Didi suggest regulatory risks are easing,” Kolanovic wrote in a note to clients on Monday.
The bullish outlook echoes his call from last week, when he downplayed fears of a looming recession and said the US stock market was poised to rebound during the second half of the year.
It also comes as the Wall Street Journal reported that regulators in Beijing are finishing up their investigations into ride-hailing giant Didi Global Inc. as well as Full Truck Alliance Co. and online recruitment platform Kanzhun Ltd. The firms are just three of the dozens of companies that have been caught up in China’s crackdown on big tech firms.
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The Nasdaq Golden Dragon China Index surged on Monday, paring losses for the past year to about 50%. The shares have suffered from heightened regulatory scrutiny, coupled with the economic pain stemming from China’s refusal to back down from its Covid Zero policy.
For Kolanovic, the declines of the past year have created an opportunity for investors, especially with the prospects of additional government stimulus. He says that while second-quarter economic data have been disappointing, recent figures point to an improving outlook.
“Even as our economists have lowered the growth targets to 3.7%, vs the official target of 5.5%, any incremental improvement from the lifting of lockdowns, relaxing regulations, and further stimulus, should be beneficial for Chinese stocks in the coming quarters,” he said.
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