China stocks are selling at a buying moment, says JP Morgan strategist
According to JPMorgan Chase & Co’s Marko Kolanovic, the rapid decline in Chinese stocks has “disconnected from fundamentals” and is giving equity investors a buying opportunity.
“We believe this is a good opportunity to add to the expected growth recovery, gradual covid reopening and monetary and fiscal stimulus,” JP Morgan’s chief global market strategist Kolanovic wrote in a note to clients on Monday (Oct 24).
Kolanovic, who has been one of Wall Street’s most vocal bulls this year, expects a strong U.S. dollar to provide a boost to relative returns in international markets such as Japan, the eurozone and the UK’s FTSE 100.
In mid-March, JP Morgan analysts led by Alex Yao surprised the industry by issuing a report calling China’s Internet sector “uninvestable” and downgraded 28 stocks, including Alibaba Group.
Two months later, Yao upgraded the sector on an improved regulatory environment, but lowered the price target on Alibaba in September due to earnings concerns.
While Kolanovic sees U.S. stocks turning year-end profitable, he expects 2023 to be “a more challenging earnings backdrop compared to current expectations.” “If a recession occurs in 2023, the onset, depth and length of the contraction will determine the extent of the earnings decline.”
