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The Tell: Bank of America strategist says he’s tactically bullish on China for first time in two years as Hang Seng enters bull market


A strategist who has been cautious toward the world’s second-largest economy for two years is changing his view.

Ajay Kapur of Bank of America says he’s now “tactically constructive” on Chinese stocks. In recent weeks, there have been nascent signs of reversal of all of the “vectors of uncertainty” apart from geopolitics.

The first of course is the zero-COVID policy, of which Kapur counts 20 relaxation moves, including reduced quarantine/ isolation days for close contacts and inbound travelers. The 250 billion yuan ($36 billion) rescue package for property includes a move to extend property bank and trust loans due in six months by a year. China also has pledged more support for private investment in key infrastructure such as railways and ports.

Kapur says the credit cycle has moved up, putting a floor under earnings per share downgrades. “And with the pivot in re-opening now in sight, credit growth could be buoyed as and when activity picks up,” he said.

The Hang Seng

shot up 4.1% on Tuesday, and is now up 20% from its Oct. 31 low, just barely meeting the technical definition of a bull market.

U.S.-listed Chinese stocks also have surged. The KraneShares CSI China Internet ETF
whose holdings including Alibaba
Tencent, Meituan Dianping,

and Pinduoduo
is up 41% since Oct. 24.

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