China Stocks Trouncing S&P 500 Wins Them Fans at Deutsche Bank

(Bloomberg) — Deutsche Bank AG’s private banking business expects to upgrade its view on Chinese stocks in coming months as it sees US inflation peaking and calm returning to global markets.

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“I want to see markets calming down, inflation not going further and then we can move into China,” Christian Nolting, global chief investment officer at Deutsche Bank International Private Bank, said in an interview. “But it should happen before October, because I think more fiscal stimulus will come in” before President Xi Jinping gets a third term. Nolting has a neutral view of China local stocks at the moment.

Chinese stocks have rallied in the face of a global selloff, as the country’s loose monetary policy — a stark contrast to the Federal Reserve raising interest rates to combat the fastest inflation since 1981 — and an easing of some pandemic restrictions raised the relative appeal of its assets.

The CSI 300 Index has climbed about 13% from an April trough, even as stock indexes worldwide tumbled into bear markets amid worries over a global recession. The S&P 500 Index has lost 10% in the same period.

A growing number of global banks have turned optimistic on China stocks, with Morgan Stanley, Bank of America and Jefferies Financial Group all ramping up bullish commentary this month.

Mark Mobius, a veteran emerging-markets investor and co-founder of Mobius Capital Partners, said China could continue to outperform global peers in the second half of the year.

“The Chinese government is moving in the opposite direction in terms of lowering interest rates and they are pouring more money into the economy to stimulate the markets so there’s a good chance that they will outperform everyone else,” he said in an interview on Wednesday.

Beijing’s determination to prop up the economy, an important driver of the stock market’s solid performance, was again highlighted on Tuesday when its finance minister said more pro-growth policies are being studied. On the same day, a newspaper affiliated with the cabinet urged banks to step up lending for infrastructure projects.

In a further sign pointing to improving sentiment and a potentially easier regulatory environment, Jack Ma’s Ant Group Co. is poised to apply for a key financial license as soon as this month, people familiar with the matter said. The People’s Bank of China intends to accept the application to become a financial holding company once it’s submitted and will then start a review, the people said.

READ: China Vows More Pro-Growth Policies as Banks Urged to Step Up

China has backed up the lifting of lockdowns with fiscal stimulus measures, “so it’s not just lip service, it’s also an agreement that there’s real support to be expected,” added Stefanie Holtze-Jen, Asia Pacific chief investment officer at Deutsche’s private bank.

Deutsche Bank favors reopening plays in the country but remains cautious on the property sector “although there are signs of stabilization,” she said.

(Updates with Mobius comments in 6th and 7th paragraphs.)

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