Chinese stocks jumped after China’s central bank announced a stimulus package last week. Yan Wang, Alpine Macro chief emerging markets & China strategist, joins Julie Hyman and Josh Lipton on Market Domination to discuss how investors should be thinking about this rally.
Wang says the “flurry of measures [announced] over the past couple of days” make it “ even difficult for us to keep pace with” and show the central bank is “ in a state of panic. They are clearly feeling the pressure that the economy is in a very deep, very stressed level. So they want to try to push the economy to accelerate.”
He notes that the recent stimulus announcement is an important step for China’s monetary policymakers because it signals “they no longer see massive stimulus as a taboo,” as it had been since the global financial crisis. “I think that’s one of the reasons why they hesitated so much in the past couple of years, even though the economy was slowing down. So now, clearly, kind of what I call an ideological straight jacket has been taken off. So that would allow them to be more preemptive in driving the economy.”
“They made the policy statement, and the market has responded,” Wang says, explaining, “We need to begin to monitor whether these kinds of policy measures will have some kind of positive impact on the economy. That’s something that, as a strategist, I think we need to realize that whatever they announce is one thing, but also whether the economy is able to respond is quite another.”
Wang says for investors looking to benefit “the best bet is just to buy the benchmarks. Buy the domestic benchmark (000300.SS, 930748.SS) and also buy the MSCI (MME=F)… because the rising tide will lift all boats.” He adds, “if I have to pick some sectors, I would say to buy the laggards, the sectors that have been really beaten down in the past couple of years. For example, consumer discretionaries, tech sector, even the property developers. They are trading at such depressed levels, I think they may benefit the most from this revolutionary process.”
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This post was written by Naomi Buchanan.
