HONG KONG, Oct 10 — Standard Chartered’s October China market outlook report says China’s equity and bond asset classes have returned to equilibrium, naming Chinese equities as a core portfolio allocation.
The report notes corrections in the onshore equity market during Q3 have restored balanced risk-reward between stocks and bonds. Growth and value styles have also normalized after previous divergence. Investors are advised to rebalance between long-term industrial themes and stable dividend assets.
While absolute valuations of onshore Chinese equities sit above historical averages, the equity risk premium has climbed above its median level since 2011, meaning stocks are not materially overvalued relative to bonds.
For equity positioning, the bank recommends a base of dividend stocks paired with exposure to long-cycle industrial opportunities. Overweight sectors include information technology, communication services, energy and materials. High-conviction themes cover AI supply chains, non-ferrous metals and new power systems.
On fixed income, Standard Chartered believes room for further rate cuts is limited, though term spreads may compress. Extending duration can boost bond returns, with 30-year Chinese government bonds highlighted as an opportunity.
Key risks include earnings volatility, geopolitical tensions, cross-border capital flow swings and US fiscal uncertainties. A barbell strategy and sector diversification are recommended.