Advisers are bracing themselves for a short-term correction in the Chinese market as monetary policy tightening takes the steam out of the rally.
Skerritt Consultants head of investments Andy Merricks says a short-term market correction is almost certain although the long-term story is “irreversible”.
He says: “My main concern is over the fiscal tightening. If they have been stockpiling commodities and they start to slow down on the purchasing, that must have a knock-on effect on emerging markets. There is concern about the immediate short term but it is irreversible and will be one we remember – we were there when China grew up.”
Alan Steel Asset Management consultant Alan Adam says: “We are getting a little bit concerned about the China syndrome following recent launches. The China story is one where there could be big hits and misses.”
The MSCI China index is up by 60.6 per cent and 91.3 per cent over one year and three years at February 26, says Lipper.
Hargreaves Lansdown senior analyst Meera Patel says: “I would be surprised to see another 60 per cent gain in China. If we saw a correction of 15-20 per cent
from its peak, that would make it a more compelling buy if you have a long-term horizon.”