China's COVID policy optimization to bring important revitalization

China's optimization of COVID-19 prevention and control measures will lead to economic recovery and an upward re-rating of equity valuations, said DBS, a Singapore-based multinational banking and services corporation.

"We believe there is a compelling upside potential for China equities to re-rate from current levels, driven by the ongoing introduction of government measures to alleviate key concerns regarding its dynamic zero-COVID policy, real estate sector problems and economic goals. These positive catalysts are now falling into place. The market has lauded such moves as evidenced by recent share price rebounds," said Hou Wey Fook, chief investment officer at DBS Bank.

Reiterating the bank's stance to stay constructive on China equities, Hou said the timing has materialized to dollar-cost average down, which is an investing strategy that involves a stock owner purchasing additional shares of a previously initiated investment after the price has dropped.

"Investment opportunities are emerging as China reopens. We stay constructive on domestic oriented sectors which are at the forefront of the reopening ripple. These include A-shares, new economy and e-commerce platforms, China consumer brands, beneficiaries of government fixed asset expenditures, and high dividend-yielding financials," he said.

The DBS Chief Investment Office did a deep dive on the 15 largest listed Chinese companies by index weight and concluded that approximately 90 percent of their revenues were derived locally. As such, initiatives to turnaround local consumption and commercial activities will have the most impact on their earnings outlook.

"This further enhances our stance to stay invested in areas and sectors benefitting from the continued revival of economic backdrop and domestic consumption, namely middle-income spending, online and physical retailing, government-driven fixed asset investment, as well as financial services," Hou said.