A fresh infusion of liquidity and earnings revisions should support China's equities market in early 2010, said Jing Ulrich, Hong Kong-based chairwoman of China equities and commodities at JPMorgan. However, the second half may prove more challenging if China's monetary policy stance turns more neutral.
Looking to the full year—as the pace of investment growth decelerates from very high levels and money supply growth slows down from last year's rate, the momentum that propelled Chinese stocks in 2009 may gradually slow down, in spite of resilient domestic demand and an improving external environment, she said.
The forces that will shape Chinese equity markets and the economy in the medium term can be broadly defined in three themes: reacceleration of loan growth in the first quarter 2010; government policy shifting to forestall asset price bubbles and promotion of private consumption.
Ulrich's statement came following the central bank yesterday raised banks' reserve requirement ratio by 50 basis points—the first adjustment since November 2008.