RBC Brewin Dolphin: Will the year of the dragon bring good fortune to China and Chinese Markets?

by | Feb 12, 2024

As the year of the dragon gets underway following Chinese New Year, Janet Mui, Head of Market Analysis at wealth manager RBC Brewin Dolphin, explores what the next 12 months could have in store in the following analysis:

“Chinese stocks struggled last year amid the country’s turbulent property sector and deflation concerns.”

“Will the dragon take to the skies in 2024? 2024 is likely to remain an uphill battle for the Chinese economy and its markets. The transition to the year of the dragon is exciting, and for those who are superstitious, it may bring about new energy and fortune.”

“Practically speaking, the profound issues in the property sector will take years to resolve. Neither is the relationship between the state and private companies likely to change anytime soon, whichever zodiac year we are in. The domestic policy environment remains unpredictable, and the upcoming US election may bring about more protectionist threats against China’s technology and industrial sectors.”

“On the positive side, the authorities are likely to manage and contain the financial risks in the economy. There may be more forceful easing rolled out, foreign reserves are ample to counter any shocks, technology progress continues, and external demand could recover in 2024 if developed economies achieve a soft-landing scenario.”

“With this turbulent backdrop, it’s unsurprising that Chinese equities have become very cheap. After falling in seven of the past 10 years, it’s unlikely to see further big drawdowns in 2024. That being said, for markets, it’s going to take a lot more than the prospect of easing and better economic data to turn their entrenched negativity around. China could really do with the year of the dragon living up to its name.”

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