The Chinese markets have underperformed by about 40% relative to peers in the U.S. and Europe, says UBS Global Wealth Management’s Kelvin Tay.
Looking ahead, Tay said Hong Kong-listed Chinese companies — which were"beaten down really, really badly" this year — are"likely to be far more attractive" as compared with their peers on the mainland.
"The policy risk tightening, we do think that most of that is actually over and done with," the chief investment officer explained."What you're going to get going forward is probably fine tuning of the measures and not, you know, an unleashing of an overhaul of the system similar toAnother factor that is set to give Hong Kong-listed Chinese stocks a relative boost is expectations for a weakening in the yuan next year.
"The renminbi has been very, very strong," Tay said."The government has actually stressed on a couple of occasions that they're not quite comfortable with the outperformance of the renminbi vis a vis the other currencies over the last six months."has strengthened more than 2% against the dollar for 2021, while its offshore counterpart has gained nearly 2% against the greenback.
"We do expect the renminbi to actually weaken in 2022," Tay said, adding that will likely affect the performance of mainland-listed Chinese stocks given their"very tight" correlation with the yuan.