Chinese markets could see further upside, strategist says

Stocks News

There may be more upside for Chinese markets as the world’s second-largest economy recuperates from the coronavirus pandemic, a strategist said on Tuesday.

“I think that it’ll continue to be constructive both on the Chinese economy and on the markets. I still think that’s there’s still meaningful upside from current levels,” said David Chao, a global market strategist for Asia Pacific ex-Japan at Invesco.

Chinese markets extended their rally on Monday as the People’s Bank of China issued medium-term loans worth 700 billion yuan ($100.99 billion) to financial institutions on Monday.

The overall positivity also comes as as Chinese policy markers have demonstrated the ability to quickly contain new waves of the coronavirus without hampering the economy, Chao told CNBC’s “Street SignsAsia.”

“This means the economy can continue its recuperation somewhat uninterrupted,” said Chao.

Recent data out of China showed supply-side manufacturing activity recovering in July. However, Chinese consumption continues to be anemic, with retail sales negative as recent floods likely hit demand, Chao noted.

But Chinese authorities appear to be on the alert to prop up the country’s economy, with Monday’s fresh fund injection boosting market sentiment, said Chao.

“That’s a very positive signal to the markets that the PBOC continues to be watching the economic events closely and that they stand ready to help propel the economy forward,” he added.