one3spinningreel| Wall Street is buying Chinese stocks again, up 12% in the past three weeks

This time the policy is more specific.One3spinningreelIncluding relaxing some purchase restrictions and price restrictions.

Chinese stocks are making a comeback at a time when China is signalling a change in the way it is reviving the property market.

Previously, investors looking for bargain-hunting opportunities had been encouraged by some of the Chinese government's moves and later found that incremental stimulus measures were not enough to revive the economy and the property market.

Wall Street fund managers cited the shift in government stance after the Politburo meeting at the end of April and the recovery in corporate profits in parts of the economy as reasons for the recent rise in Chinese stocks. Chinese stock ETF iShares MSCI China (MCHI) has risen 12% in the past three weeks.

While some fund managers remain cautious, sceptical ones also note that the latest comments by policy makers about new ways to stabilise the property market mark a change.

Following the proposal of "housing speculation", policy makers recently talked about the need to support the development of the real estate market and reduce the number of unfinished pre-sold houses through the implementation of policies, and they also announced plans to hold the third Plenary session of the 20th CPC Central Committee.

Xu Zhongxiang (Jason Hsu), chairman of Rayliant Global Advisors, pointed out that this time the policy is more specific, including relaxing some of the restrictions on purchases and prices.

Dozens of Chinese cities have supported "trade-in" housing, which has boosted investor sentiment. All this suggests that the Chinese government is now focused on stimulating growth after focusing on managing risks, including debt and geopolitical issues. Xu Zhongxiang said: "the government's attitude is more inclined to support growth, which will certainly excite the market."

Given the volatility of Chinese stocks in recent weeks, Howie Schwab, an emerging market growth strategy fund manager at Driehaus, would like to see more evidence. "the question now is, is this a stopgap measure or a long-term solution?"

Schwab wants to know how the government solves the financial problems of real estate developers, and Xu Zhongxiang is contacting developers in second-and third-tier cities to learn about the local government's implementation of central government policies.

Fund managers such as Vivian Lintherston, emerging markets fund manager at William Blair, are watching to see whether unfinished property projects are moving forward and prices have stopped falling. "individual buyers want to see prices stabilise and we need to see new home sales bottoming out," she says.

Thurston is also looking at corporate earnings prospects, which have begun to improve at a time of strong export growth for home appliance, machinery and power-related companies. The expansion of the category of companies that raise earnings forecasts will be another encouraging sign.

Thurston said the new regulatory ideas unleashed by the new chairman of the China Securities Regulatory Commission are also encouraging.

Mr Thurston points out that Chinese stocks have been dragged down by slowing economic growth, an ageing workforce, debt problems and "de-globalisation" caused by tensions between China and the US.

Geopolitical factors remain a risk and may limit the rebound of Chinese stocks, especially when trade frictions between China and the United States intensify and some fund managers believe that China is "uninvestable", but Thurston believes that Chinese stocks are one of the cheapest stocks on the market, with a price-to-earnings ratio of 9% based on expected 2025 earnings.One3spinningreel.4 times, as long as the economic outlook improves, Chinese stocks will rise, causing investors to be "afraid of missing it."

Thurston has been selectively increasing her holdings of Chinese stocks, preferring companies whose earnings prospects are improving.

Mr Schwab favours appliance makers that benefit from stabilising house prices and "trade-in" incentives for consumer goods. Other attractive companies include Internet companies such as Alibaba, Tencent and JD.com, which have focused on giving back to shareholders through buybacks and dividends.

"the market is waiting for evidence and fund managers will reallocate funds when they see evidence in the data," said Xu Zhongxiang. " Xu Zhongxiang also said his buy list includes bank stocks that are expected to outperform as China's economy rebounds.

Text | Lishma Kapadia

Editor | Guo Liqun

This article was first posted on the official account of Wechat: Barron Weekly. The content of the article belongs to the author's personal point of view and does not represent the position of Hexun. Investors operate accordingly, at their own risk.