Allianz Global Investors said the “worst of the retail forced margin selling” among Chinese investors is over, and that it is keeping its key positions in the market intact despite the continued decline in the equities market in the mainland, which has spilled over into Hong Kong.
The Shanghai Composite Index has fallen 32% since its June 12 peak, wiping out an estimated $3.2 trillion in value. On Wednesday, the index closed down 5.9%, while the Hang Seng Index ended 5.84% lower.
In a statement, Allianz Global said it expects the Chinese equities market to stabilize soon after a raft of measures implemented by the government and the central bank to restore investor confidence shaken by tighter margin loan rules implemented before the downturn mid last month, and reignite their appetite for stocks.
“We expect the China A-share market to stabilize gradually going forward. The government’s rescue measures do not necessarily guarantee an immediate restoration of the uptrend but we believe the worst of the retail forced margin-selling is now behind us. In addition, Hong Kong equities are now trading at attractive valuations.”
As for its position, Allianz Global said:
“In terms of the portfolio we maintain our key positions. We also maintain our view that policy beneficiaries including the railways and environmental stocks are well positioned for the second half of 2015.”
China has lowered the central bank rates and the reserve requirement ratio of banks, while the PBOC pledged to provide liquidity into the market as part of the measures to boost investor sentiment. Chinese brokerages and fund managers also said they will purchase equities.
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