Low expectations for China are a big opportunity for returns: strategists

According to Andrew Swan, head of Asian equity at MAN Group, China aims to stimulate economics and major structural changes, businesses can earn strong profits.

“The sentiment around the Chinese market has clearly not been recently and has been pretty poor for a while. I think investors are ignoring some of these positive developments,” Swann said on Friday on CNBC’s “Squawk.” “Box Europe.”

“It seems people have short memories. Last August and September (OF) it was very clear that China’s leadership understands the challenges facing the economy, especially around deflation. I’m going to see the development of the policies they mentioned to support the economy.”

China’s policymakers have already cut interest rates to promote growth, and traders now Waiting for details on the country’s promised stimulus packageis expected to cover areas that include low consumer demand and struggling real estate markets.

The world’s second largest economy has beaten forecasts 5.4% growth Important concerns remain in the final quarter of 2024 deflation Potential impacts of US President Donald Trump’s new 10% tariff About China’s imports. Beijing has already responded Targeted retaliation obligation And this week I vowed to take measures To protect its interests in the face of “bullying.”

Swan told CNBC that tariffs had more impact than they had been eight years ago and that implementation could be avoided through transactions. Economists widely believe that in existing forms, trade measures will have a relatively impact even on export-dependent Chinese economy. During the first President Trump.

Capital Economics estimates that the US commodity demand account is less than 3% of China’s GDP, and it estimates that the majority of this trade will continue.

Swann argued that technology development, including the democratization of AI and spread of AI, is due to startups like startups. China’s deepseek – And economic changes will have a major impact on China’s returns.

“I think there will be a different economic model coming up, not just cyclical support for the economy, but I think it is on the crisis of structural change that is quite important for the way growth models work, perhaps led by low-income groups. As an example, we could look back at this point as a turning point for GDP’s consumption share,” he said.

“I think that’s where we’re here. That might change your perception.”

Swan said that China’s revenue has been under pressure for many years due to the macro environment, and expectations for corporate profit growth are very low and reflect valuations.

“We believe that, in contrast to absolute growth, growth rates actually drive stocks in the region is growth rates compared to expectations, and there is a lot of evidence.”

He said, “What you tend to see is when those expectations start to improve, or when the stock market is going very well. All Asian markets are being pushed very fundamentally. They are driven by the profitability of the company. They are historic low and there is also a reputation for that level.

Swan acknowledged that investors are concerned about factors such as tariffs, strict Chinese government control, geopolitical risks and baggage. Recent Real Estate Market Crashappealing for investment in nearby democracies like India.

Lincolnpan, a private equity partner and co-head of PAG, an alternative investment firm based in Asia, told investors last month that CNBC’s Emily Tan You need to find “high quality alpha” in India and Japan Due to uncertainty in China, over the next six to nine months.

“I think it explains why there’s a market,” Swann said of those jitters. “The real problem is, what is the outlook, and it changes from where we were. If we don’t change, the market will continue to suffer from poor performance and suffer.”