Chinese markets and country-specific exchange traded funds have rebounded and may continue to pick up momentum ahead.
“We see scope for China’s cyclical economic rebound to strengthen,” BlackRock strategists, led by Richard Turnill, Global Chief Investment Strategist, said in a note. “Sentiment on China has swung in a positive direction, after the country’s sluggish growth was feared to be a major risk to the global economy just a year ago.”
BlackRock analysts believe China could experience solid near-term growth as global companies have become increasingly positive in China, based on analysis of text mining of corporate conference calls.
Additionally, ongoing reforms, notably from the supply side, could further support Chinese economic growth. Reforms have bolstered industrial profitability and strengthened commodity prices. China’s exporters are also enjoying improvements from a rebound in global trade.
The Chinese economy is also shifting towards domestic-oriented consumption as a main growth driver. Consequently, consumption-driven sectors liek technology and services are becoming a growing component in the economy.
“We see the cyclical growth upswing underpinning Chinese and emerging market (EM) equities,” the strategists said.
Nevertheless, the Chinese markets are not without their risks.