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China Fund Manager’s Buying Spree Stirs Hope for Stock Market Rally

Last Updated September 23, 2020 1:54 PM
Joseph Young
Last Updated September 23, 2020 1:54 PM
  • Top Chinese investment firms believe stock market valuation is close to the bottom.
  • Sentiment around equities improves as U.S.-China trade deal implementation progresses.
  • Tech, pharmaceuticals, and 5G stocks are among the best-performing in both China and the U.S.

Chinese investment giant Rosin Asset Management’s general manager Wang Rongxin believes the valuation of the stock market is “close to the bottom.” The agreement of the U.S. and China to progress in implementing a trade deal may kickstart a new rally of equities in the West.

The upbeat tone of hedge fund managers in China differs from the forecasts of top U.S. investors, who believe the stock market will face a short-term downtrend.

Global Stock Market Shows Favorable Path of Recovery

High net worth individuals generally remain positive towards a strong stock market performance in the medium-term, entering the 2nd half of 2020.

stock market recovery
U.S. stock market completes V-shape recovery | Source: Yahoo Finance

A large part of the optimism stems from a noticeable decline in new coronavirus cases worldwide.

Following China, South Korea, Japan, Vietnam, Taiwan, and New Zealand’s lead in fully reopening the economy,  many countries in the West started to take the necessary steps to reignite the workforce.

The U.S., Spain, the U.K., Italy, and Germany are set to reopen their economies within May , to avoid further economic slowdown as a result of the coronavirus pandemic.

The productivity of both small and large-size business is expected to spike significantly  in the coming weeks. The strong recovery of the U.S. stock market since late March will likely restore the appetite of investors heading into the 3rd quarter of the year.

Pharmaceutical companies perform strongly in Q2 2020 | Source: CNN 

In both the U.S. and China, tech stocks kept the stock market afloat in the 2nd quarter of 2020.

In China, 5G companies thrived throughout the virus outbreak, allowing major investment firms to record large gains in the range of 40% to 60%. 

In the U.S., tech stocks like Apple, Amazon, Netflix, Google, and Microsoft prospered as the usage of digital products surged  in the past two months.

As top money managers in China get more comfortable in investing in the 5G, technology, and pharmaceutical sectors, the U.S. could see a similar trend in the short-term.

stock market
Not everyone is convinced of the stock market recovery | Source: Krystal Ball 

Progress in U.S.-China Trade Deal is a Key Factor For Growth

As the positive sentiment around the stock market rebound grows, the U.S. and China led discussions to implement a trade deal in the near future.

The global economic turmoil due to the pandemic has seen China’s Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer, and Treasury Secretary Steven Mnuchin agree to take the trade deal forward to the implementation phase.

A statement obtained by Bloomberg read: 

Both countries fully expect to meet their obligations under the agreement in a timely manner.

The milestone comes after U.S. Secretary of State Mike Pompeo toned down the accusations of the White House  that the coronavirus outbreak originated from the Wuhan lab.

Pompeo said that the government possesses significant evidence that the outbreak began from the laboratory. But, he still emphasized:

We don’t have certainty.

The U.S. likely started to distance itself from fueling conflicts with China as the nation moves towards reopening the country.

The enthusiasm of both nations in adhering to the trade deal can further fuel the confidence of investors that the U.S. stock market will sustain its momentum over the long-term.