China is ready for economic incentives and large structural changes that the corporations will set for strong yields, according to Andrew Swan, head of the Asian share in Man Group.
“The feelings around the Chinese market were obviously quite bad, not only recently, but for a while. I think investors are ignoring some of these positive events,” Swan told CNBC “Squawk Box Europe” on Friday.
“People appear to have a short memory. Back in August, September [of] Last year, the leadership in China was very clear that they now understand the challenges the economy faces, especially about deflation. And I think [in] 2025, we will see the introduction of those policies they mentioned to support the economy. “
Chinese policy donors have already reduced interest rates to increase growth and traders are now Favor more details about the promised measures of the nation stimuliwhich is expected to target areas, including poor consumer demand and real estate market.
The second largest economy world has won forecasts 5.4% growth In the last quarter of 2024 but significant concerns remain over deflation and potential influence New 10% of US President Donald Trump about Chinese imports. Beijing has already answered target retaliation And this week He vowed to take measures To protect their interests in the face of “harassment”.
Swan said CNBC in the fact that the tariffs would now have less influence than they would have had eight years ago, and that implementation can be avoided by agreement. Economists widely believe that in their existing form of trade measure, they will have a relatively contained influence even on the Chinese economy related to exports, as many companies have already taken preventive measures to transfer their supply chains after the US-Kine trade war during the first Trump Presidency .
The capital economy estimates that demand for American goods makes up less than 3% of Chinese GDP that most of this store will continue.
Turn
Swan claimed to be technological development – including democratization and spreading AI, thanks to startups like Chinese deep – And economic shifts would have a greater impact on Chinese yields.
“I think we will see a different economic model, not just some cyclical support for the economy, but I believe that we are on the verge of some rather significant structural changes in the way the growth model function. GDP, as an example, maybe guided by low -income groups, “he said.
“I think there’s a big picture here and that may change the perception.”
Swan said Chinese earnings have been under pressure for many years due to the macro environment and that the expectations for the growth of corporate profits are very low, which reflects in their estimates.
“We believe, and there is a lot of evidence that what really drives shares in the region is growth rates in relation to expectations, unlike absolute growth rates.”
He added: “What you tend to see is when these expectations begin to improve or beat expectations, stock markets are very good. Asian markets are very fundamentally guided. They are triggered by corporate profitability. Corporate profitability is now in historical low and assessments are close levels.
Swan admitted that investors were concerned about the factors, including tariffs, narrow control of the Chinese government, geopolitical risk and luggage Recent Real Estate PadInvesting in a nearby democracy, like India, attractive.
Lincoln Pan, partner and associate of private capital in an alternative investment company PAG focused should look for “alpha quality” in India and Japan Over the next six to nine months due to uncertainty in China.
“I would say he explains why the market is where it is,” Swan said about these jerks. “The real question is, what are the prospects and is it changing from the place we have been? If we do not change, the market will still be weaker and suffer.”
