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UBS and Blackrock upgrade Chinese equities after recent selloff


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UBS and Blackrock upgrade Chinese equities after recent selloff

Chinese equities show potential for a turnaround after Blackrock and UBS upgrades. However, the Evergrande issue should ensure further short-term volatility.

BG_ubs_9809809809.jpgSource: Bloomberg
 Joshua Mahony | Senior Market Analyst, London | Publication date: Thursday 21 October 2021 

Chinese shares have been a big underperformer over the course of the past four months, with the CSI 300 losing 17% over the period going into yesterday’s low.

With the seemingly inevitable default of property giant Evergrande coming back into focus today, there are still risks despite the sharp rebound yesterday.

However, there are certainly some key players that see the recent slump as an opportunity to get long Chinese equities. Many will take confidence that the world’s biggest asset manager has decided to move back into Chinese stocks, while UBS has also shifted to overweight after 16-months at underweight.

The CSI 300 weekly chart highlights how we have seen a drop back into the 200-week simple moving average (SMA) this week, with the recent pullback looking like another potential higher low.

With the Evergrande issue still yet to be fully resolved, we are likely to see further volatility ahead. However, the fact that the Chinese government and regulators are taking actions to lessen the economic risks posed by overleverage could provide the basis of a bullish story for growth over the medium term.

CSI-Weekly211021.pngSource: ProRealTime
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