Chi Lo, a senior strategist for Greater China at BNP Paribas Investment Partners, was recently interviewed by China Money Network about the future policy direction of the Chinese central bank; why he believes the biggest risk in the Chinese economy is a property correction and its knock-on effect on banks and other sectors; as well as his advice for investors on building exposure to China now.
In the interview, Chi Lo commented:
There are at least two markets within the Chinese property markets. Some third-tier or even lower-tiered cities have always suffered from over-supply and insufficient demand. With the current correction, they will suffer more.
But in tier-I and tier-II cities, there is strong underlying demand, even though the price increases have been above fundamentals, such as income growth. Here, we will see less price correction as in the lower-tiered cities because of strong demand.
He also ended the interview by saying:
This is a time to build position and gain exposure to China, because the economy is at a turning point of structural reforms. So it will be positive for the long term. Cyclically, the economic cycle is bottoming out. If the economy is not reacting well to the government’s stimulus measures, there will be policy easing, which again is positive for asset prices.
But I would caution that investors have to be patient. One should not expect to go in and get out within a quarter to make money.
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To read the interview transcript, Chi Lo: Patient Investors Should Build Up China Exposure Now, go to the website of China Money Network.
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