UBS warns it’s not time to bottom-fish in China’s markets yet

Investors looking for bargains in the Chinese market should be careful, as equities there could suffer further losses, cautions Kelvin Tay of UBS Global Wealth Management.

“I think there’s actually more room for this to actually happen,” Tay, regional chief investment officer at the firm, told CNBC’s.Squawk Box Asiaon Wednesday. “I certainly don’t think this is the bottom.”

After a defeat that started late last week and then accelerated the Hang Seng Index in Hong Kong fell more than 8% in just two days, China’s markets are now among the worst performing in Asia Pacific to date.

Tay said many institutional funds are currently reassessing risks as China’s regulation focuses on sectors such as technology and private education. He explained that the process will likely take a few weeks before funds make a final decision on whether to liquidate or accumulate more shares in China’s markets.

“I think the decision will probably go in the direction of the liquidating side,” Tay warned. “I don’t think this is really time for fishing.”

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Tay said Beijing’s regulatory action coincides with a “window of opportunity” as the global economy recovers from the pandemic.

“Economic growth this year is out of the question, because you have US growth of 7% and Eurozone recovery of 4.3%, which in turn will probably pull the Chinese economy as well,” he said. .

In addition, next October’s Politburo meeting will coincide with the end of Chinese President Xi Jinping’s second five-year term — a “very, very important event” for the country.

Chinese regulatory outlook

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