Ironically, this statistic was the reason for sharp growth of quotations on October 22. To reassure investors, the Chinese authorities almost immediately after the publication of macroeconomic data announced that the government will support the economy and return to high growth rates. Active verbal interventions of the government and supported the market, said investment strategist “BKS the Prime Minister” Alexander Bakhtin. Part of these interventions was published in Saturday, October 20, plan to reduce the tax burden on the population and the private sector.
He suggests the introduction of tax credits tied to the cost structure of citizens. For example, the benefits promise to give those who spend on their own education or the education of children, as well as for medical purpose. Tax deductions will be those who rents a home and pays the mortgage. The final volume of tax support is estimated at 1% of GDP, which is comparable to the amount that the US President Donald trump has sent in the American economy due to its tax reform, said a senior portfolio Manager of the criminal code “Kapital” Vadim Bit-avragim.
Another reason for the rise of prices in the Chinese market could become a large influx of foreign money, says the main strategist of the “BCS global markets,” Vyacheslav Smoljaninov. According to him, last week, Chinese exchange-traded funds (ETFs) attracted the highest for the last three years amount — $2,361 billion More on Chinese market came only in early July 2015 — $13 billion. “Then the market was extremely volatile. The index reached a peak and collapsed. It was clearly a game of local speculators. It is possible that now we are talking about speculation, because prices rise when someone actively buys” — says Smoljaninov.
What to invest?
Analysts are hesitant to predict the future dynamics of China’s stock market. Chinese equities are now undervalued theoretically, the market should rise further, but risks looming over China because of a trade war with the United States, has not disappeared and still not allow investors to play short, Alexander Bakhtin.
“The risks will still persist, so I would refrain from speculative and the medium of purchases. If we consider Chinese paper long-term investment, it is possible that this is a good opportunity to enter,” says Bakhtin.
The support measures offered by the authorities of China, in the first place, will affect consumer demand, says leading strategist “Aton” Alexey Kaminsky. “Accordingly, it is beneficial for companies that can benefit from the growth in domestic demand. Manufacturers of cars, consumer products, companies from the real estate industry”, — said Kaminski.
According to Vadim Bit-Avragim, investors should look for shares in Chinese technology companies, for example, buying paper ETF on index the Internet industry. “If you invest in the Chinese market, I would buy such paper, which also focused on the consumer and IT sector”, says the Manager. This, for example, companies such as online retailer Alibaba and search engine Baidu.