Wealth Within bearish on chinese equities

Published in the Investor Daily - January 2014 by James Mitchell

Chinese equities have been on a steep downward trend since 2007 and look set to continue their fall in 2014, according to wealth advisory firm Wealth Within.

The bearish outlook is sharply contrasted with AMP Capital’s opportunistic position on Chinese equities in early December. Credit Suisse also had China as a top investment strategy for 2014.

Speaking to InvestorDaily, Wealth Within analyst David Thang said he is bearish on both the Shanghai Composite Index (China) and Hang Seng (Hong Kong).

“If you have a look at the Shanghai Composite Index, it has been in a steep downtrend since October 2007 and really, momentum flow over the long term is still very much biased to the downside,” Mr Thang said.

“I don’t thing Chinese equities will bottom any time soon,” he said.

China released its CPI numbers yesterday, which were below market expectations, adding to the negative outlook.

“Market expectations were 2.7 per cent and the actual release was 2.5 per cent,” said Mr Thang.

“Past predictions have pretty much been in line with expectations and it is quite surprising for these figures to come in under expectations,” he said. “It only adds to the trend of lower levels ahead.”

Mr Thang said that in terms of Asian indices, the only exchange he is bullish on is the Nikkei (Japan). 

“The Bank of Japan is looking to devalue the Japanese Yen,” he said.

“So if they are playing that card, the chances of Japanese equities continuing to power on north are quite favourable. 

“If we had to compare the Nikkei, the Hang Seng and the Shanghai Composite, the Nikkei would definitely be the pick for 2014, followed by the Hang Seng and then lastly would be the Shanghai composite.” 

Mr Thang also cited higher interbank lending rates and the strengthening of the Renminbi (RMB) against the Australian dollar as additional reasons for his analysis. 

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