# invest in fin markets  25. 10. 2021

Sentiment change in the Chinese market

Sentiment change in the Chinese market

Since the beginning of this year, there has been no bigger scarecrow on the markets than the Chinese market, which has naturally translated into stock market valuations as well as Chinese corporate bond yields. Chinese political elites have been aware of this situation and in recent weeks have made every effort to reverse the unfavorable developments through positive statements from the state media, direct market interventions as well as dialogue with large investors from around the world. This effort is also slowly beginning to show in the perception of global investor sentiment about China. The widespread panic over Chinese assets in recent months is evidenced by the valuation of the Hong Kong Stock Index, HSI, which sold in early October for less than the book value of companies in this index. In today’s world of high stock prices, this is a truly unprecedented value. Also at the level of profits, the HSI index sold for less than 10 times this annual profit. For comparison with global indices, Chinese stocks have not reached such an abysmal value in the last 20 years.

The stock market was not the only one that predicted only the worst. Bond traders expected the probability of default for Chinese national developers to be almost 45%. Such a high probability of default would be high even in times of financial crisis, and not in times of still loose global monetary policy.

Several large investment banks have noticed these extremely low values on Chinese assets and have begun to reassess their stance on China and gradually increase their positions. This was reflected in rising prices for companies that no one even wanted to touch three weeks ago. For example, such an index of developers has grown by more than 7% in the last two days. Also hitherto hated stocks such as Alibaba, Tencent or Didi Global (Chinese UBER) have seen decent growth over the last two weeks (Alibaba: + 14%; Tencent: + 8%; DiDi: + 25%). At first glance, it looks like investors can better assess the risk. An alternative view is that low prices on Chinese assets are too much of an attraction to go unnoticed.

Roman Vitásek, CFA
Portfolio manager, IAD Investments

Back to all articles


Are you interested in news from the world of investment? On our blog, our portfolio managers inform you every week about what is happening on the stock markets, you will also find many other interesting topics in the field of investing. Activate notifications for new articles in the blog section and you will never miss investment news again.

Investujte s nami

with us

Today, really anyone can invest, it is important to choose the right partner who will manage the investment.

Investujte na fin trhoch

in fin markets

Verified information on news and the latest topics that affect events in the financial markets.

Investujte do seba

in yourself

Investing in yourself can sometimes be the most lucrative.

This material is a marketing announcement. Before making any investment decision, review the sales prospectus, articles of association and key investor information document for IAD Investments, reports. spol., a.s. (hereinafter referred to as “IAD”) in the Slovak language at the registered office of IAD, at points of sale, at the registered office of the depositary or at www.iad.sk. For more information, contact your financial intermediary or www.iad.sk.

The value of the investment in the mutual fund may also decrease and the return on the amount originally invested is not guaranteed. There is also a risk associated with investing in mutual funds. In accordance with the mutual fund statutes, the share of securities issued by states and international organizations listed in the annex to the statutes of individual mutual funds may exceed 35% of the value of the fund’s assets, which may reach up to 100%. The IAD is obliged to pay out the unit certificate of the Prvý realitný fond and the Korunový realitný fond without delay, but no later than within an extended period of 12 months. Assets in the fund Prvý realitný fond is invested mainly in real estate, including accessories for the purposes of their management and sale, in ownership interests in real estate companies and in liquid financial assets, the economic nature of which results in close links with the real estate market. Korunový realitný fond has at least 85% of its assets continuously invested in the units of the Prvý realitný fond.