After a difficult two-year period for Chinese equities due to strict regulations, geopolitical tensions and economic slowdown, 2023 looks more promising for investors.
China’s financial markets have been very volatile due to various policy decisions and circumstances that have made foreign investors nervous. However, it is possible that 2023 will be a new beginning for investors.
Significant changes in the country could lead to a normalisation of the Chinese economy and provide many opportunities, especially in consumer-related sectors. The outlook for Chinese equities is positive as several risk factors that weighed on the market in 2021 and 2022 have almost disappeared: strict regulation, the property crisis, health policy in regarding Covid and political conditions.
After tightening regulations, Beijing has now eased the pressure and is looking to support businesses, including major internet players and property promoters. Tensions between the US and China, another risk factor, are not expected to worsen, according to experts, and the post-Covid economic recovery is expected to be the main driver of Chinese equity growth in 2023.
On January 2023, the Chinese government announced the reopening of borders to facilitate international operations and trade activity.
Although the lifting of restrictions was quickly implemented, creating some short-term difficulties, China’s economic growth recovery in 2023 is estimated at 5%. This would make China the only major global economy to experience an acceleration in GDP growth.
There are many compelling reasons to consider investing in the Chinese market. With more than 6,000 listed companies, the total market capitalisation of this market exceeds $19 trillion, making it the second largest stock market in the world after the US.
In addition, Chinese equities can offer an interesting opportunity to diversify a portfolio in terms of geographical exposure and investment themes. We see significant opportunities in several key sectors such as healthcare, green transition and technology.
Investing in these sectors can help benefit from the economic growth and development of these industries in China, while reducing the risks associated with a single market or sector exposure.