After three years of intense restrictions, China has finally opened its borders. But one overarching question remains: Is China investable again?
According to the top research providers, the short answer is yes.
“Our outlook for China entering the new year is positive,” said Peng Wensheng, head of the research department at China International Capital Corp. “China’s macroeconomic policies have supported growth, and recent changes to Covid-19 and property sector policies will likely boost economic activity and corporate earnings in the coming quarters.”
CICC, along with UBS Securities, tied for No. 1 in Institutional Investor’s 13th annual All-China Research Team. This year’s ranking was based on the votes of 3,160 investments professionals across 975 institutions. Huatai Securities remained at No. 3, while JPMorgan rose three spots to No. 4. BofA Securities rounded out the top five.
Two separate lists were also compiled to represent the views of international and Mainland China voters. The domestic ranking closely resembled the overall results, with CICC and UBS tying at No. 1. Huatai ranked third, JPMorgan took fourth, and GF Securities placed fifth.
In the ranking based on international investors, UBS was the sole No. 1 firm. CICC placed second, while BofA Securities tied for No. 3 with JPMorgan. Citi placed fifth.
At JPMorgan, China stands as the key overweight market in Asia. The firm expects the overall business cycle in the region to recover quicker than the rest of the world, according to James R. Sullivan, head of Asia Pacific equity research.
“The current rotation that we see in investor funds out of [Southeast Asia] and into China should continue in our view,” Sullivan said. “Favorable sectors include internet, consumption, and renewables.”
Wensheng had similar views on the reopening, predicting that China’s macro policies will have a stronger effect on economic activities, particularly on the side of domestic demand.
Still, applying a comprehensive global lens remains critical to success for investors, according to Sullivan. This is due in part to trends such as the shift toward a multi-polar global system, an understanding that national security concerns factor into economic decisions in all countries, and an heightened focus on environmental, social, and governance issues.
“In this changing world, the most important asset we can bring to clients of all types is context,” Sullivan said. “We are working hard as a global team to leverage our best-in-class research across all asset classes to better understand future states for both China and the rest of the region.”
For UBS, China’s lockdown measures have presented both challenges and opportunities, according to Eric Lin, the firm’s head of China research.
“Cross-border travel restrictions have made it difficult for global investors to perform research on China, but UBS has a clear advantage being the largest international house in China,” Lin said. “We expect gradual easing of Covid restrictions leading to consumption rebound and release of pent-up demand from [the second quarter] onwards.”
The downturn in property is also expected to reverse, according to Lin, who expects corporate earnings to rise by 10 to 15 percent, resulting in an upside for the equity market. The firm estimates China’s gross domestic product will grow 4.9 percent in the new year.
Overall, China’s top research providers have an optimistic outlook as they enter the new year.
“In the context of a likely global economic slowdown, China’s economic recovery could stand out and provide a haven for investors seeking relative growth,” said Wensheng.
In addition to naming the top research providers, II also asked investors to rank the region’s top sales teams and corporate access providers. In the All-China Sales Team, Huatai outpaced CICC to take the No. 1 spot. CICC ended up at No. 2, where it was followed by UBS and JPMorgan in third and fourth place, respectively. BofA rose two spots to place fifth.
UBS pointed to its sales team’s new digital strategy as a differentiator among its peers.
“Tailoring to onshore clients and after years of development, we’re now able to distribute advisory content on WeChat via our official channel and WeCom app; the first foreign broker to do so,” said Chaplin Tong, head of Hong Kong and China advisory sales at the firm.
Regional investors are also becoming more sophisticated in A-shares, and UBS is seeing an uptick in demand for clients in the U.S., Europe, and South Asia, Tong added.
When it came to corporate access — the business of connecting investors with corporate executives — Huatai rose five spots to take No. 1. CICC and UBS were each bumped down a spot, coming in at second and third place, respectively. JPMorgan rose one spot to No. 4, while Morgan Stanley dropped two places to No. 5.