NEW YORK, NY/ACCESSWIRE/January 13, 2022 // Bank of China (SEHK:3988) released the Global Asset Allocation Strategy Report by Private Banking of China for the fourth consecutive year, suggesting that in 2022, global asset should be allocated in order stocks, bonds, gold and commodities. The report said China’s assets will be revalued as the country’s economic recovery slows and seeks stability.
According to the report, China’s stock market is still in the early stages of recovery and is expected to rise in 2022 at a rate comparable to that of 2021, but with a more balanced structure and better investment experience. In terms of industry segments, technological progress, science and technology innovation and high-end manufacturing will be the theme of the year, while mass consumption will be worth looking forward to.
According to the Bank of China, manufacturing investment will be the main driver of China’s economic recovery in the future. Looking ahead to 2022, although China’s economy is under pressure from contracting demand, supply shock and weakening expectations, supported by the accommodative monetary policy that prioritizes structure and proactive fiscal policy, the recovery will be slow but steady. The manufacturing industry, as a variable, will change from a facilitator to an engine of economic growth.
The Bank of China remains positive on the future outlook for Chinese equity allocation and continues to recommend Chinese stocks in global equity markets. He believes that A-shares should explode after a reversal in 2019, a recovery in 2020 and a renewed trend in 2021. A-shares should remain at the start of the recovery in 2022 and be qualitatively bullish throughout the year, with a more balanced structure and a better investment experience.
“China’s stock market is expected to continue to recover in 2022 and present greater opportunities than in 2021 as the trend is further strengthened and recognized.” The report estimates that the contractual credit policy will move towards a proactive policy in 2022, contributing to valuation increases; the price scissors between the PPI and the CPI will gradually narrow, and midstream and downstream companies will see their profits increase. Meanwhile, as the pandemic becomes historic, a revival in mass consumption is expected. Moreover, the rebalancing of the assets of domestic residents is accelerating, as is the allocation of Chinese assets from foreign funds. The additional funds are still considerable, but we must be careful about whether changes in global and national inflation expectations will lead to large fluctuations in the stock market.
The Bank of China expects the A-share market’s overall financing needs to reach RMB 2.5-2.6 trillion in 2022, with equity financing needs of RMB 1.5-1.6 trillion as the economic activity is increasing in the post-pandemic era and businesses are more willing to invest.
In addition to A-shares, Hong Kong shares, whose valuation was at an all-time low last year, have become the key investment recommended by the Bank of China this year with its profitability even more noticeable. The year 2022 could be the turning point where Hong Kong equities return to value with a greater likelihood of valuation increases.
“HSI’s current absolute valuation is lower than that of A-shares, the three major US stock indices, major Japanese or European stock indices, while its dividend yield is higher than that of the aforementioned major markets and the yield of the States U.S. 10-Year Treasury Bond Taken together, the HSI has significant valuation advantages over major global stock indices and major returns on risk-free assets, the Bank of China said, also from the premium AH , Hong Kong stock values are bottoming out relative to A-shares, indicating high medium to long-term investment value.
Additionally, the report also highlights that the US economy is still resilient with strong demand for equity allocations and recommends US equities as the standard allocation. But caution is called for in the face of the sharp swings that can occur when the Federal Reserve raises interest rates. European equities are recommended and its recovery is accelerating with moderate policies. The same goes for Japanese equities as they have strong liquidity support and are fundamentally sound. Among emerging markets, Southeast Asia is the highlight, including Vietnam and the Philippines. Caution is needed for Indian companies with high valuations.
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THE SOURCE: Bank of China
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