The spike in cases brought by the reopening will lead to shortterm pain in the economy, as indicated by the weak PMI in December. However, we think the pace of recovery may also be faster than the market expects. We think economic activities could return to normal after the Lunar New Year. The reopening will likely significantly boost domestic consumption and private investment.
2022 has been a challenging year for Chinese equities, with multiple headwinds. Looking into 2023, we are expecting meaningful improvement. Growth is likely to accelerate with China’s decisive move to reopen, the expected improvement of the property market, and a benign inflation outlook. Chinese equities could be a bright spot amid a global deceleration in 2023.
Since the Party Congress in October, Beijing has worked towards addressing the two key issues that have dragged China’s economy and market lower over the past 18 months. Firstly, there has been a clear pivot in Covid-19 policy. Secondly, the launch of 16 measures to support the property sector is expected to help the sector recover. China’s leaders have also planned a full agenda to meet with foreign leaders to address and stabilise the geopolitical situation.
