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BlackRock downgrades Chinese stocks, emerging-market stocks to neutral: Report


BlackRock Investment Institute has revised its outlook on Chinese stocks, moving from an overweight rating to a neutral position, Bloomberg reported. This adjustment is driven by concerns related to China’s property sector and a perceived limitation of the positive impact of the stimulus measures.

In addition, the Bloomberg report said BlackRock also downgraded emerging market stocks to neutral from overweight, given the pull of a slowing Chinese economy. Meanwhile, BlackRock further upgraded Japanese stocks, considering “strong earnings, share buybacks and other shareholder-friendly corporate reforms”, the Bloomberg report said.

China’s economy is struggling in the wake of the Covid-19 pandemic. Its property market is in dire straits with default risks. Although the government has announced several stimulus measures in the last few months, they have not been able to instill hope in the economy.

The public debt of the world’s second largest economy is growing, its exports are slowing and it also has to deal with geopolitical issues. China’s economic outlook is bleak.

China’s Shanghai Composite Index is flat for the year and the Hang Seng is down about 11 percent year to date.

Experts believe that the gloomy outlook of the Chinese market may make foreign institutional investors (FIIs) move out of it and increase their focus on other emerging markets (EMs), including India.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services he pointed out that the Shanghai Composite Index is the worst major market if we take the near-term and long-term views.

“The index is flat, not only for the year but also for the past 16 years. The Shanghai composite is now at 3,126, the same level as March 2007. This is a terrible long-term performance,” Vijayakumar said.

He said that the disillusionment with China is only increasing and this could be good for India.

Vijayakumar emphasized that the prospects for the Chinese market look very low with a shrinking population, a slowing economy, political tensions with the West and anti-business economic policies. That is why FPIs are following the ‘avoid China’ policy.

“This is definitely good for India,” said Vijayakumar.

“Increased outflows from China and inflows into India are clear inevitable long-term trends. But in the short term, high valuations in India and rising bond yields in the US will challenge this trend,” Vijayakumar said.

Read more: Can China’s gloomy market outlook spur foreign investor interest in India? Experts weight i

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Updated: 19 September 2023, 09:59 AM IST

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