Buy slump in China market despite Covid concerns: BOFA Securities

A short-term correction in the Chinese stock market could be a buying opportunity for investors, said strategists from Bank of America Securities.

Winnie Wu, China strategist at investment banking, acknowledges that China’s burgeoning Covid situation remains potentially volatile, and there could be more bad news ahead if Covid cases recovery or insolvent real estate companies.

“But you know, in general, looking at the bigger picture, worst in terms of corporate earnings, disruption, Covid cases – those things should have been behind us in the second quarter. okay,” she told CNBC. “Asian street signs” on Wednesday.

Wu points to recent announcements such as reduced quarantine for international travelers to China.

“China is sticking to its zero-Covid policy, but we have seen some changes and hope the authorities will try to minimize the disruption to people’s daily lives,” she said.

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“Although we are seeing some recovery in Covid cases, [and] we’ve seen a few other cities start to do this mass testing… I doubt we’ll go back to that prolonged lockdown as we experienced in the second quarter,” she speaks.

Shanghai is conducting Covid testing in several districts this week after detecting new Covid cases, a notice on the city’s WeChat account said.

Wu also points to Bank of America Securities’ so-called “wax and weakening indicator,” which measures sentiment based on factors such as investment flows to predict the outlook for the Chinese market.

We advise our traders continuing the rally and consider these short-term corrections as buying opportunities.

Winnie Wu

China Strategist at Bank of America Securities

That indicator is currently in a very bullish zone. During feedback, the very bullish region signals She said there is a 100% chance the CSI 300 will increase in the near term, with returns averaging over the next two to six months among teenagers.

“Therefore, we remain optimistic. We advise investors to continue the rally and see these short-term corrections as buying opportunities,” she said.

Mainland China markets have outperformed major global indexes over the past month, but traded lower on Wednesday.

The Shanghai Composite closed 1.43% lower on Wednesday, while Shenzhen Ingredients down 1.25%. The CSI 300 index, which tracks the largest listed stocks in the mainland, fell 1.46% that day.

– Evelyn Cheng of CNBC contributed to this report.

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