Business / Economy

Chinese equities low enough to make them a buy: Expert

By Cai Xiao (China Daily) Updated: 2014-02-07 08:09

Chinese equities have fallen enough to make them suitable to buy, said Howard Marks, chairman of Oaktree Capital Management LP.

The Chinese economy has been rising strongly, stimulated by easy money and high-level fixed-asset investment but now the Chinese authorities want to move away from this strategy and regulate the level of fixed-asset investment, Marks told China Daily.

China announced in November 2008 that it would loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.

A stimulus package estimated at 4 trillion yuan ($570 billion) was made available in 2008 and 2009 to finance programs in 10 major areas.

Although China's economy was inevitably stimulated, negative influences were also created. One of them was an increase in bad bank loans.

According to a report, the non-performing loan balance of 16 listed Chinese banks totaled 440 billion yuan in 2013, increasing 40 billion yuan compared with that at the end of 2012.

"In other words, we need a transition and the basic point is that the transition is not easy," Marks said.

"If you go from a highly stimulated and excessive activity and want to convert that into a more moderate one, there is a possibility you fall not to a moderate level but to an insufficient level of economic activity."

Liu Yingqiu, director of the Center for Private Economic Studies under the Chinese Academy of Social Sciences, said the overall 2013 gross domestic product growth rate is likely to drop to 7.6 percent from 7.7 percent in 2012, because of possible moderate growth momentum in the fourth quarter. It may be the fourth consecutive year of a falling GDP, down from 10.4 percent in 2010.

Emerging markets including China still possess outstanding potential based on demographics and low starting points. Chinese economic reforms including those in the financial sector are positive, so Marks has a positive view on the nation's economy in the long run.

Credit asset securitization is one of the financial reforms. The China Securities Regulatory Commission is actively working with the China Banking Regulatory Commission to promote credit securitization this year.

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