To be sure, there is a chance that Chinese stocks will trot or even stumble, rather than gallop, in 2014.
Arguably, the biggest risk is that the Chinese reform progress becomes hindered by resistance from entrenched interests, as reform policy implementation is a key factor in my overweight outlook for China. There’s also the risk that tensions in the region over a disputed air zone could worsen and lead to military conflict.
Finally, in the near term, Chinese growth could slow as support from housing and infrastructure investments fades with the transition toward a consumption-led economy, and as the overheated housing market and ballooning shadow banking system debt require policymakers to keep credit conditions tight.
Still, for the three reasons I cite above, I’m still bullish on China for now.
Sources: Investment Directions, Investment Strategy Group research, Bloomberg