Wall Street is increasingly optimistic about China: there are many opportunities for A-shares next year, and the economy will be more resilient after policy relaxation

BlackRock, the world's largest asset manager, a think tank that released its 2022 Global Investment Outlook report on Monday, December 13, expects China to ease monetary and fiscal policies and regulations to continue but not increase, thereby maintaining a moderately tactical overweight view of China's stock market.

The report notes that next year will enter a new market environment that is different from the past half century, that is, the global stock market will rise for the second consecutive year, the bond market will fall for the second consecutive year, which is the first time in about 50 years, so next year overall is still recommended for over-allocation stocks.

BlackRock also expects inflation to persist and stabilize above pre-COVID-19 levels, with central banks starting to raise interest rates but remain more tolerant of inflation, which will keep real interest rates at historic lows and support risk assets. As a result, the agency is more bullish on equities than fixed income and continues to increase its holdings of inflation-preserving bonds.

For the Chinese market, BlackRock believes that the low starting point for global investors to allocate assets to China is inconsistent with the growing weight of the Chinese economy in the world. In addition to maintaining a tactical small overweight stance on Chinese equities, the report favors high-yield and relatively stable Chinese government bonds. The report maintains a long-term overweight in Chinese assets and believes that the current valuation of China's stock market is attractive enough.

China Fund News said that after the boots of policy efforts to maintain a stable economy landed, BlackRock, a global asset management giant with a management scale of nearly $10 trillion, expressed optimism about A-shares for the first time. A major premise of the proposed A-share increase is that it believes that it will still be worth over-allocating next year, which is very different from the view that many institutions are worried that as inflation bursts, the Fed may accelerate the water collection, and the global stock market trend will begin to decline.

BlackRock also said in the Asia Investment Outlook 2022 released three weeks ago that some investors believe that the valuation of Chinese assets is more attractive than in many developing markets, and may be at or near a turning point.

In early November, it said it was optimistic about six major areas in the context of China's rapid development:

"One is the new infrastructure field, including artificial intelligence, semiconductors and cloud services; the second is high-end industrial equipment, including new energy equipment, telecommunications equipment, and industrial automation; the third is automobiles and components, including batteries and electronic systems; the fourth is innovative and fashionable consumer goods and services, such as healthy and fashionable catering, sportswear and life services; the fifth is biotechnology, CXO (drug research and development and production outsourcing), retirement services; and sixth, wealth management and pension investment."

In fact, in addition to BlackRock, many mainstream Wall Street institutions this month have said that they are increasingly optimistic about the performance of Chinese assets next year.

JPMorgan Chase & Co., the largest U.S. bank in assets, has upgraded China's stock market to "overweight" on the grounds that expectations of loose policies and the stock risk premium from regulatory initiatives have been priced out. Against the backdrop of extreme optimism about the U.S. stock market and the stock market as a whole next year, the bank particularly believes that the Chinese economy will be more resilient in 2022.

The team of Goldman Sachs strategist Christian Muelle also bullish on the Chinese stock market on Monday, arguing that the stocks that have been hit hard before offer a buying opportunity, also on the grounds that most of the headwinds facing the Chinese economy have been priced and that low valuations are making the Chinese stock market more attractive.

According to Xinhua News Agency's summary, near the end of the year, a number of Wall Street investment institutions have increased their efforts to lay out the Chinese market and look forward to sharing China's development dividends in the new year. Analysts believe that the current world economic growth prospects are facing many uncertainties, and the steady charm of the Chinese market and the growth potential of the Chinese economy make overseas institutions cherish it.

For example, asset manager Pioneer Group plans to launch a China Select Equity Fund next year, the first time it has launched a fund in an emerging market to invest in a single country, underscoring the importance of the Chinese market.

By the end of November this year, Bridgewater, the world's largest hedge fund, had raised about US$1.25 billion for its third Chinese investment fund, making it one of the largest foreign private equity firms in the Chinese market. Dalio, the founder of Qiaoshui, believes that China's economic growth rate at this stage far exceeds that of the Western world, and it is gaining a leading position in the "economic competition" with developed countries.

Another asset management giant, Fidelity International, also expressed optimism about China's stock market in its 2022 investment outlook. Miao Zimei, its Asian equity investment director, said that for long-term investors, 2022 is a good time to start investing in China's stock market:

"Investors can focus on industries that are closely related to China's next phase of economic development, such as high-end manufacturing, renewable energy, electric vehicles, software, mass consumption, and next-generation healthcare."

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