JP Morgan Private Bank sees 5 to 8 pc market dip as buying opportunity for Chinese stocks

JP Morgan Private Bank remained cautiously constructive outlook towards the equity market in offshore China, suggesting investors add holdings when the market pulls back 5 to 8 percent, or in the range of around 25,000 to 26,000 points in the Hang Seng Index, said Timothy Fung, head of Equity Strategy Asia.

Despite the appealing artificial intelligence-related Chinese stocks, China still saw soft consumer activities and negative earnings growth in companies recently, Fung said.

He suggested focusing on the Chinese tech stocks, high-dividend stocks, and some of the underperformed consumer stocks that have reasonable valuations.

Fung noted that Chinese tech stocks currently represent valuation discounts compared to foreign tech shares, which have already reflected policy risks. 

Furthermore, as large-cap tech companies still lag behind their record highs despite the recent market rally, this may indicate that even if investors want to increase their exposure to these stocks, those already heavily overweight in tech may have limited capacity to allocate additional capital to the sector, he added.

The bank also maintained a cautiously positive estimate on the onshore Chinese market, supported by the policy efforts and overall bull market expectation.

However, the recovery in the Chinese market remained uneven, citing the anti-innovation measures and consumption incentives, he said.

Besides, the private bank said the Indian share market will outperform the market this year, with an expected double-digit return, due to its earnings recovery, consumption growth, and attractive valuations.