• Overview

    While Chinese equities is still the only market to be in the red on a rolling 12-month basis but there are a few reasons to be slightly more optimistic. There’s a growing consensus that President Xi’s effort to clamp down on dominant industry players has turned China’s beaten-down offshore stocks into bargains. Certainly China’s -8% 12-month performance looks cheap relative to the +31% gain for the US S&P500.  There is also a suggestion that President Xi may scale back China’s economic overhaul as the masses feel the pain. Finally, Evergrande has avoided a default on its USD bond paying $83.5 million of interest which had been due on Sept. 23.

    Chart 7: Chinese equities still struggling (CSI 300 Index)

    Source: Bloomberg


    It may not be too late to get onto the re-opening bandwagon. As dormant travel demand begins to heat up, and international travel restrictions ease, hotel REITs provide an opportunity to play the economic rebound.

    Bloomberg’s hotel REITs index is still down 18% since the end of 2019, when reports of the coronavirus began surfacing, compared with a rise of more than 15% for the broader REIT index and a 40% gain for the S&P 500.

    The gap between the hotel and broader REIT index did almost close in March this year but the gap subsequently widened as the Delta variant took hold from around May.

    Chart 8: Still looking for a re-opening trade? 

    Source: Bloomberg


    Rising bond yields and the rotation toward value have provided a crumb of comfort to European bank stocks. Finally, the sector is back above its pre-pandemic level. 

    European banks stocks have been the best performers on the Stoxx 600 Index this year with a 37% rally. Performance was helped by last month’s removal of regulatory restrictions on dividend payments and share buybacks. As the dividend ban ends, European banks will return to having higher dividend yields than their U.S. peers.

    Chart 9: Look whose back – European banks feeling unloved no more

    Source: Bloomberg

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