A “serious rally” in Chinese shares is possible, says Eurizon’s Jen

(Bloomberg) — Investors should extend recent gains in Chinese stocks and the stimulus-fueled yuan, as well as the decline in the country’s bonds, according to Eurizon SLJ Capital’s Stephen Jen.

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“Investors are so underweight all things Chinese and Chinese stocks are so undervalued that serious upside is possible,” Jen, chief executive of London-based Eurizon SLJ, said in a report to clients on Friday.

Jen, who said last month that Chinese companies could be lured into selling a $1 trillion pile of dollar-denominated assets as the U.S. cuts interest rates, is watching investors, including billionaire David Tepper, in expressing optimism about China after its government introduced sweeping stimulus measures.

The blitz of policy easing lifted the CSI 300 index last week to its biggest gain since 2008, yet 19 percent of respondents to a survey by Bank of America Corp. in September on global fund managers said “shorting Chinese stocks” was one of the most popular. jobs.

With China stepping up as the Federal Reserve cuts interest rates and oil prices remaining low, risk assets “should do very well,” Jen said.

“Following the US election, I expect global equities to rally strongly through the end of the year,” he added.

Jen, the creator of the “dollar smile” theory, which posits that the greenback rises when the US economy is either booming or in a deep slump, expects the currency to trade lower against the euro, yen and yuan on as US inflation slows to zero. and the world’s largest “soft land” economy.

–With assistance from Paul Dobson.

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