Amid global risk-off, Julius Baer sees China market rally on stimulus

Mark Matthews, Chief Investment Officer of Bank Julius Baer & Co, predicts that amid global risk-off the Chinese stock market may see a rise due to a possible new economic stimulus and the introduction of a fund to help stabilise stock prices.

China is reportedly thinking about increasing its budget deficit for 2023 with a fresh round of stimulus. This plan includes issuing at least 1 trillion yuan (equal to $137 billion) in extra government debt, which will be used for investing in infrastructure projects.

Reports suggest that China is also considering the creation of a stock stabilisation fund to help boost investor confidence in the stock market. This potential plan may involve investing in local stocks through established financial institutions and professionally managed funds, as reported by the Financial Times. The government's investment could be matched by other funds and institutions working together, as mentioned in the report.

Matthews said another thing that could make investors feel more positive is a possible meeting between Chinese President Xi Jinping and US President Joe Biden. This meeting might happen during the Asia-Pacific Economic Cooperation summit in San Francisco, which is scheduled for November 15 to 17.

The last time Biden and Xi met was back in November, during the Group of 20 summit in Indonesia.

Despite the rising geopolitical tensions due to the Israel-Hamas conflict, Matthews expects global markets to gradually start gaining.

The markets are going down now because of the concern about what's going to happen...but history shows us that these geopolitical events do not tend to be disruptive for the market. I think, generally, markets around the world will all go up," he told CNBC-TV18.

Ultimately, he noted, what moves share prices is the earnings of the companies that these shares represent.

He pointed out that 85% of the 32 S&P 500 companies that reported their third-quarter earnings have beat consensus estimates by nearly 10%. The overall earnings are also likely to be better than expected, he said.

"India is our favourite market in Asia," Matthews said, highlighting they have invested their client's money in the country.

While the overall trajectory of the market is going to be upward, there will be times when the market may not outperform, he said, noting that the fourth quarter could be one such quarter.

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