JPMAM advises active approach in China selection as economy slows

Tiananmen_squareInvestors should take a more active approach in sector and company selection as China feels the economic pinch after its GDP grew at 6.2% in the quarter ended June – the slowest rate since the first quarter of June 1992, JP Morgan Asset Management (JPMAM) said. The result was in line with expectation, but weaker than the first quarter of 2019 (6.4%). In a statement, China’s National Bureau of Statistics recognised a “complex environment both at home and abroad” amid a protracted trade war with the US and said global economic growth is slowing down. While both sides have threatened to ratchet up tariffs, the US and Chinese presidents agreed to a truce at the G20 summit in Osaka last month. “However, in order to counter the negative external shocks and ensure stability, we continue to expect policy easing, especially in infrastructure investment and targeted liquidity support, in the coming months,” Marcella Chow, global market strategist at JPMAM in a statement on China.  “In addition to the special local government bonds, a new round of debt swap is being implemented to relieve the debt burden on local government financing vehicles (LGFVs),” added Chow. JPMAM favours sector leaders who are more domestically-driven and have less exposure to uncertainty from the trade tensions. “Current valuation of Chinese stocks remain attractive to long-term investors and improving data should help strengthen the fundamental case for A-shares,” said Chow. She added: “Investors may consider Chinese bond investments as a way to diversify the risks.” ©2019 funds global asia

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