While investors have brushed off China’s recent regulatory crackdown in the country—and troubles in its real estate sector in particular—global property manager T. Rowe Price says the near-term volatility creates an “attractive” investment opportunity next year.
Globally, investors are finding it much easier to invest in companies benefiting from the Covid-19 disruptions than in Chinese stocks – but that may soon change as pandemic behavior returns to normal, T. Rowe Price in his annual global market outlook.
US investors have largely avoided Chinese stocks in recent months as regulators crack down on major real estate developers like Evergrande, which has been on the verge of default since the summer.
Despite the recent slowdown from the real estate sector, China’s economy remains relatively strong – with 4.9% GDP growth in the third quarter, solid exports and a stable currency.
Chinese President Xi Jinping continues to consolidate power with policy reforms but “fall into the regulation cycle,” T. David Eiswart, portfolio manager at Roe Price’s Global Focused Growth Equity Strategy Fund, explains.
“China is in a regulatory cycle where they are taking advantage of flush global liquidity to solve real estate issues,” he says, “in some sense, China is fixing the roof while the sun is shining. “
With the regulatory cycle likely to fade over the next two to three quarters, there is an “attractive” upside ahead and near-term volatility “should be viewed as an investment opportunity, not an escape,” according to Eiswart. “