Investors looking for occasions in the Chinese market should caution as the shares could suffer further losses, warns Kelvin Tay of UBS Global Wealth Management.
“I think there really is more Room for this in reality run, “Tay, the company’s chief regional investment officer, told CNBC’s” Squawk Box Asia. ” on Wednesday. “I certainly don’t think this is the bottom.”
Following a route that started late last week and accelerated as the Hang Seng index in Hong Kong has plummeted more 8% in just two days, the Chinese markets are now among the worst in Asia-Pacific year to date.
Tay said many institutional funds are currently reassess the risks in how much Chinese regulations address sectors such as technology And private education. He explained that the process will likely take a few weeks before the funds come to a final decision on if them should liquidate or accumulate more actions in the Chinese markets.
“I think the decision it will likely sway towards liquidation side”Tay warned.” I don’t think this is really the time to fish deep.
Tay said Beijing regulatory the repression coincides with a window of opportunity “like the global economy bounces back from the pandemic.
“Cheap growth this year is not disputed because you have the United States growing at 7%, you have the Eurozone recovering at 4.3%, which in the shift is likely to attract the Chinese economy long with this too, “he said.
Also, the Politburo meeting next year in October will coincide with the end of Chinese President Xi Jinping second five-year term – a “very, very important” event” for Village.
Looking ahead, Tay predicted that three potential catalysts could end the current uncertain regulatory prospect in China.
“I think the first indication should come this week or next from the Politburo meeting in July, “he said, adding that event will be “closely scrutinized by investors” for clues on regulation.
The next potential catalyst is whether the Chinese economy he sees a sharp slowdown, a scenario he described as “very unlikely”.
“Ironically, if the economy slows down dramatically from here, then they are likely to take a step back because you can’t afford to really tighten things up on a regulatory base … and not risk the economy inclination over, “explained Tay.
The last catalyst, which Tay said was the “minus.” probable”among the three, it is whether US-China relations see a” dramatic ” improvement” overnight.
“This will be also result in the sentiment is actually improving, “he said.
The relationship between Washington and Beijing remains tense. Foreign Deputy of China minister recently said the economic giants I am now in a stalemate “.
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