Equity market outlook this year is positive

Deutsche Bank's equity market outlook for China in 2019 estimates that MSCI Inc.'s proposed increase of A-share weighting and FTSE Emerging Index's A-share inclusion could result in an inflow of $90 billion, and recommends GARP-themed investment. (GARP refers to growth at a reasonable price based on greening, advancing manufacturing, reforming State-owned enterprises and promoting consumption.)

The bank is positive about China's equity market in 2019 and has set the year-end index targets for MSCI China/CSI300 at 82/3,608, or 16 percent upside for MSCI China and 20 percent upside for CSI300 Index from the level at the end of 2018.

The spike in equity risk premium in 2018 appears to have been overdone. MSCI China's price-to-earning-ratio de-rating (or PE-de-rating) in 2018 was the third worst since 2006, next to only 2008 when the global financial crisis broke out, and 2011 when the European debt crisis happened.