China’s regulatory shifts: Where do we go from here?

Executive summary

In this Fullerton Insights, Strategist, Robert St Clair, examines China’s recent regulatory actions, predominantly targeting technology and education companies, which has triggered sharp falls in domestic markets. They are likely to have far reaching consequences across affected industries and the competitive landscape in China. This paper takes a deeper look at the implications, and the trends and possible scenarios that investors may wish to keep in mind, especially as they consider their longer term investment allocations to China.

Executive Summary

  • Cyclical sector level winners and losers may unfold, as sector leadership across China’s equity markets churns in the years ahead
  • The real estate sector carries risks, but also opportunities for discerning investors, and China’s policymakers have enough resources to contain any significant adverse spillovers from Evergrande
  • We have a positive outlook for Chinese fixed income, and real yields are likely to remain attractive compared to other key markets
  • As active fundamental managers, we tap our bottom-up sector analysis to present two scenarios – bullish and bearish – for the long-term performance of Chinese equities