Stay put or delve into China's equity markets?

Some analysts say S’pore investors should keep away, others advise taking baby steps

- Chor Khieng Yuit

Chinese markets have extended gains for the fourth straight session on Feb 8 ahead of the weeklong Spring Festival break.

The CSI 300 Index, the bluechip benchmark for the Shanghai and Shenzhen exchanges, has risen 4.5 per cent over the past four days but remains near a five-year low following three years of market correction.

Markets rebounded after Beijing intensified efforts to stem the fall in share prices and curb short-selling, which involves an investor borrowing a security to sell, in the hope of buying it back at a lower price later.

The move on Feb 7 to appoint a new head of the securities watchdog also seems to have given investors some more reason to cheer, although the general verdict on Chinese equities remains mixed.

Market watchers said investors who already hold shares should stay put, but they want to see more policy stimulus before they recommend that clients step up their investments in China.

However, others think it is time for new investors to tip-toe in or for existing ones to buy more.

Ms Mali Chivakul, an emerging markets economist and strategist at Swiss private bank J. Safra Sarasin, said Chinese growth has entered a new territory.

Ms Chivakul said the past 10 years were all about the infrastructure and housing boom, with the property sector contributing to a quarter of gross domestic product, but this model is outdated given there are just too many residential units on the market.

New areas of growth, such as high-end semiconductor manufacturing and green technology, are not big enough yet to make up for the slowdown in housing demand, added Ms Chivakul.

As a result, J. Safra Sarasin is neutral on Chinese equities and is telling clients who already have shares to stay invested, while those who have not gone in yet should stay out for now.

DBS Bank is also advising clients to wait out the downturn and hold on to their investments for now.