The latest positivity around Chinese markets doesn’t yet offer the kind of clarity most international investors are looking for to move beyond selective plays. Chinese stocks ended the week with four straight days of gains — a rare upswing after a dismal start to the year. A combination of official rhetoric, monetary policy moves and media reports helped support the turn higher from multi-year lows. “The litmus test for a more sustained recovery in shares would be sequential improvement in economic data,” David Chao, global market strategist, Asia Pacific (ex-Japan) at Invesco, told me Thursday. “I think the bar might be higher this year given the past few years of underperformance.” “Investing in China, you have to have an active strategy,” he said, emphasizing the need to focus on industries that receive policy support. Three that Chao mentioned were: high-tech manufacturing, robotics and alternative energies. Policymakers in the last week signaled they are willing to do more to support the economy as a whole, although its unclear to what extent. The People’s Bank of China announced a bigger-than-expected cut to one of their key monetary policy tools, the reserve requirement ratio, effective Feb. 5. When I asked PBOC Governor Pan Gongsheng at a press conference Wednesday about implications of U.S. Federal Reserve easing, he acknowledged that would create room for China to loosen its monetary policy as well. On real estate, the PBOC, the high-level National Financial Regulatory Administration and the housing ministry this week also made concerted statements about supporting struggling developers. This kind of cooperation “shouldn’t be taken for granted,” Edward Chan, a director at S & P Global Ratings, told me Friday. He noted how previously the PBOC tried to help real estate but the housing ministry was less supportive. But whether improved coordination necessarily means stocks will rise broadly is another matter. Sentiment is low, and the retail…
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