CLSA's Research: Limited Downside Pressure on A-shares from US-China Trade Conflict, Strategically Positive on H-share Allocation Potential
The US-China trade conflict has been a source of concern for global markets, but CLSA's research report offers a glimmer of hope for investors. While the trade negotiations have hit some bumps in the road, CLSA believes that the complementary nature of the US and Chinese economies will keep them at the negotiating table, avoiding the extreme scenario seen in April. This suggests that the downside pressure on Chinese stocks, particularly A-shares, is expected to be limited.
In the short term, A-share volatility is anticipated to remain lower than that of H-shares. However, CLSA maintains a strategically positive view on the long-term allocation potential in the H-share market. The broker opines that the H-share market offers higher quality companies in key industries such as Chinese internet (AI), semiconductors, biotechnology, and resources. As the Southbound Overbought Index (SOI) tracked by CLSA continues to rise, even as the Hong Kong market wanes, it signals that smart money is buying at good prices.
Despite the current situation, CLSA suggests remaining patient and waiting for clearer signals. While the long-term allocation in the H-share market remains strategically attractive, Citi advises investors to bide their time. The broker believes that the potential for favorable entry points in the H-share market will continue to unfold, offering opportunities for investors who are willing to wait.
But here's where it gets controversial... Some investors may argue that the current trade conflict could lead to a prolonged period of uncertainty, impacting the H-share market in the long term. Others may suggest that the SOI is not a reliable indicator of market trends. What do you think? Share your thoughts and opinions in the comments below!
