The importance of the new measures
The People's Bank of China has announced the creation of a swap facility that will allow investment companies and funds to access funds to buy shares. This move is also supported by lowering interest rates, which aims to improve liquidity in the market and restore investor confidence. At the same time, the creation of a stabilization fund is being discussed, which should contribute to even greater stability in the market.
When I saw the Hang Seng Tech Index, which tracks Hong Kong's leading tech companies, rise nearly 4% and gain more than 20% since August, I realized that investors may begin to see the tech sector in China as an opportunity with great investment potential, as prices are still at low levels[1].*
Opportunities, but also caution
Although the current measures are encouraging, I know that I have to be careful. The Chinese market has witnessed cycles of short-term gains and losses this year, as previous stimulus has not produced long-term results. If Beijing does not address other major problems, such as weak consumer confidence, there is a risk that this recovery may only be temporary.
My view of the future
At the same time, however, I see potential for further growth. Global market analysts such as Chaoping Zhu of JP Morgan Asset Management predict that these measures could pave the way for economic growth as early as 2025. If the GOC focuses on solving structural problems, it could lead to a more sustained improvement in market conditions. [1]
For me, as an investor, this means an opportunity, but also a need for diversification. The technology sector in China looks promising, but I will continue to be wary of the risks associated with China's economic policy. If I time my investments correctly, while ensuring sufficient diversification, I can use this moment to appreciate my portfolio. [2]
* Past performance is not a guarantee of future results
[1], [2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which is subject to change. Such statements are not a guarantee of future performance. They involve risks and other uncertainties that are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
[1] Hang Sang Tech Index price performance over the past five years: https://tradingeconomics.com/hong-kong/stock-market