As we move through 2022 we can expect an interesting year for China’s equity market given the pledge by the People’s Bank of China (PBoC) to use monetary tools to spur the economy and boost growth. The US and China are set to spend the year diverging on monetary policy – as the US Federal Reserve is tightening, China has just started an easing cycle. Last year, China’s regulatory reset made the headlines, alongside its “zero Covid” policy and deleveraging within the property sector. But we believe we are past the point of most pain.
In addition, deleveraging measures in the property sector are showing signs of easing, such as relaxing mortgage availability. We expect continuous monetary and fiscal easing going forward. We have already witnessed some of these measures more recently with the PBoC announcing reserve requirement ratio cuts in the back end of 2021 and interest rate cuts in January 2022.
We believe that structural growth opportunities should remain the core of our portfolios, and we are taking a barbell approach with quality cyclical growth companies. Many investors are overly focused on top-down considerations and are overlooking company-specific fundamental and environmental, social and governance factors; therefore, we are continuously upgrading the quality of stocks in our portfolios through market volatilities.