Big China stock selloff offers a chance to add exposure - Kolanovic
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The tumble in China stocks to start the week should give investors an attractive entry point, according to J.P. Morgan global markets strategist Marko Kolanovic.
Worries about economic growth as President Xi Jinping began his third term as leader of the Communist Party, cash flooded out of equities on Monday. Panic selling hit the Shanghai Composite (SHCOMP) and the Hang Seng (HSI) in Hong Kong. The KraneShares CSI China Internet ETF (KWEB) sank more than 14%, with bellwether names Alibaba (BABA) and JD.com (JD) off double digits.
"China growth data surprised positively over the weekend, but their equity market is selling off strongly today," Kolanovic wrote in a note. "We believe this is a good opportunity to add given an expected growth recovery, gradual COVID reopening, and monetary and fiscal stimulus."
"In FX, markets are consolidating amid elevated political and intervention noise, but the dollar (DXY) (USDOLLAR) (UUP) uptrend remains intact," Kolanovic said. "The breach of key levels in major USD pairs â 150 on USD/JPY (FXY) and 7.25 on USD/CNY (CYB) â indicates the limited efficacy of intervention."
"For the S&P500 (SP500) (SPY), we assume that every 1% up move in USD is a negative for SPX profits to the tune of 0.5%," he added.
Kolanovic cut its 2023 S&P 500 EPS estimates to flat year over year.
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