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BlackRock: It's time for investors to pay attention to Chinese equities
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Loading...Investors are set to gain as China is pushing for new ways that private sector money can fund its domestic companies, according to Helen Zhu, head of Chinese equities at BlackRock.
Her analysis comes amid Beijing’s plans to introduce a new stock board for start-ups in Shanghai, which is being billed as a pilot program to test more market-oriented measures before rolling them out in China’s other stock exchanges. The new science and technology innovation board was announced by President Xi Jinping in November and is expected to be launched by June.
“It’s really opening the door to a very new and promising financing channel over the medium to longer term. And I think people will read that positively,” Zhu said. “I think the asset prices will respond accordingly as well.”
The new high-tech board is meant to ensure that companies that are not yet profitable but are in “high growth areas” start to have access to the equity financing they otherwise could not tap.
The new government initiatives are widely seen as an attempt at persuading such companies to list at home instead of abroad. An effort last year to develop a domestically traded share class called China Depositary Receipts did not take off. As of 2018, China has more than 186 companies that are valued at at least $1 billion — so-called unicorns. They have a combined value of more than $736 billion, according to a report released earlier this year.
Zhu predicted that the reforms to China’s equity markets will continue to be cheered by investors.
“We do still see the economy kind of decelerating but we have seen the policies really inflect. That’s why markets have been quite buoyant today, kind of pricing in the expectation that the policies are going to have a substantial impact and therefore, really kind of get us back on track in the second half of this year,” she said.
“On a structural reform front, I think that’s very important, as well, because it really bolsters confidence. It makes people feel more optimistic about investing in fundamental businesses, as well as in public market and traded assets,” Zhu added.
The Shanghai composite is up more than 20 percent for the year so far.
Source: CNBC
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