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Article: China Insights

Monthly update on Chinese markets
29 May 2020
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    Summary

    • In a delayed session of the National People’s Congress (NPC) China dropped its numerical growth target for 2020, reflecting significant macro headwinds from the COVID-19 pandemic and high level of external uncertainties
    • Accommodative macro policies and an emphasis on effective implementation should help an ongoing economic recovery from a sharp contraction in Q1, though challenges remain and the recovery path is uncertain
    • The spending priority will be on reviving domestic demand, through higher health spending, more support for enterprises/SMEs, and tech-focused infrastructure initiatives
    • In the fixed income market, April saw USD7 billion of inflows into the onshore bond market, driven by foreign purchases in short-dated government papers
    • Following a recent pull-back in the regional stock market, valuations of Chinese equities are now in an attractive range in terms of PE and earnings yield vs. bond yields