(Bloomberg) — Credit Suisse Group AG’s global investment committee has upgraded its equity allocation to overweight just three months after the cut, saying it offers Chinese stocks with “attractive upside potential” after a record slump.
Most read by Bloomberg
The committee upgraded US equities to overweight, citing resilience amid risks related to the Russian invasion of Ukraine. Credit Suisse also increased its exposure to Chinese equities, citing low valuations and supportive economic and regulatory policies.
Chinese stocks have tumbled in recent weeks on Beijing’s close ties with Russia, regulatory headwinds and a zero-tolerance policy from Covid-19, before recovering in recent days on the nation’s strong push to stabilize financial markets. On Monday, the valuation of the tech-heavy Nasdaq Golden Dragon Index fell to 13.6 times expected earnings, a far cry from around 41 times in June 2021, just as Beijing had begun whipping up internet companies.
Credit Suisse had already downgraded global equities to neutral in December as fears of rate hikes gripped US financial markets and the spread of the Omicron variant prompted lockdowns. The sell-off in stocks accelerated in 2022 as Russia invaded Ukraine, sending many global stock indices into bear markets.
However, sentiment towards risky assets has improved over the past week on optimism that peace talks between Russia and Ukraine are advancing and as the Federal Reserve reassured investors that economic growth will continue. The Nasdaq 100 index gained 3.7% on Wednesday, further moving away from the bear market territory it touched earlier this month.
The story goes on
“The positive market reaction to the FOMC’s deliberations suggests markets have had time to digest the changed economic outlook,” committee members led by Michael Strobaek wrote in a statement Thursday. “Although we would like to highlight the still high level of uncertainty regarding developments in Ukraine, we note that there are glimmers of hope.”
As an additional positive factor, Credit Suisse cited the recent fall in commodity prices, which rose sharply after Russia invaded Ukraine, reducing the risk of a stagflation shock.
Most Read by Bloomberg Businessweek
©2022 Bloomberg LP
Comments are closed.