How To Bet On A Chinese Recovery In 2023

For nearly three years, China maintained its “zero-COVID” strategy of mass testing and nation-wide lockdowns, even as the rest of the world returned to normal life. But in a bid to boost its sluggish economy, the country finally decided to relax its stringent restrictions. The consequences, however, have been dire; specialists believe China is now facing the largest outbreak of COVID-19 to date, with 1 million new cases and 5,000 fatalities daily.


China is set to relax quarantine restrictions for overseas travellers in the coming month, a much-needed breath of fresh air for the country’s dwindling tourism industry. But the enthusiasm is not just felt amongst international sightseers, as hordes of Chinese citizens have been cooped up at home, waiting for the opportunity to explore the world once again – and when the chance arrives, these keen travelers will be sure to embrace it with high spirits and even higher spending.

Changes in China’s Policy

To bolster the Chinese economy, the 16-point plan for the property sector gives housing developers much-needed financial support and prolonged loans, while also reducing the down payment necessary for home buyers. This initiative is intended to stimulate both supply and demand within the sector.

It is anticipated that there will be a wide-ranging economic recovery, leading to an upsurge in consumer demand for items such as cars, travel, leisure activities, hospitality, and casinos, akin to the post-lockdown surges witnessed in the United States, Europe, and other regions.

As Chinese manufacturing roars back to life, it could bring about some much-needed alleviation of supply chain issues, which could lead to lower inflation in the US and other countries and spur global economic growth – a particularly welcome development given the world is on the brink of a recession. China, being a crucial international producer of countless commodities and an important trading associate of the US and Europe, makes its impact global.

How To Trade the Changes in Chinese Policies?

Forecasting a sharp rebound in China’s economic growth to 5%, investment bank Morgan Stanley is betting that the easing of COVID restrictions will lead to a tremendous increase in consumer consumption in 2021. Quite a few are looking forward to this happening!

If you’re in agreement, why not contemplate investing in the Kraneshares CSI China Fund ETF (KWEB)? This ETF tracks the CSI Overseas China Internet Index, offering exposure to internet-related Chinese firms who should thrive as consumer demand takes off.

If you broker does not offer something of that sort, consider one of our suggested brokers in providers sections, or ask your broker to advise you individual stocks from this index.

Exploring beyond your boundaries may be beneficial, as a rebound in the Chinese economy is likely to have a ripple effect around the globe. After all, China is Europe’s biggest trading partner for both exports and imports, offering a possible boost to the European economy – particularly luxury goods, materials, industrials, energy and auto industries.

If you are looking to make a savvy investment, you should consider trading in the likes of Richemont (CFR), LVMH (MC) and Kering (PPRUY), all of which boast luxurious labels such as Cartier, Louis Vuitton and Gucci respectively. 

Such high-end businesses tend to be more resilient than the average consumer-goods sector, as the wealthy customer base they cater to is unlikely to be significantly affected by economic downturns or cost-of-living issues. For those wishing to diversify their portfolio, the iShares MSCI Consumer Discretionary ETF (ESIC) might be a great option, as it includes LVMH and Richemont as two of its largest holdings.

Investing in both BMW and Volkswagen might be a worthwhile consideration, as these two companies have seen a lot of success in selling cars to China’s affluent consumers.

If you have extra margin on your account, a loose stop loss and mid-term position for 2023 may lead your individual trades in decent profits. 

As the Chinese economy continues its upswing, it will no doubt revive its infamous craving for commodities; driving up the price of copper, in particular. Reda explained that the indispensable metal is seeing reduced stockpiles, yet enduringly robust demand from electric vehicles and electrification initiatives.

Investing in the US Copper Index Fund (CPER) or the WisdomTree Copper ETF from Europe could be a great way to capitalize on the fact that both BHP Group (BHP) and Rio Tinto (RIO) have identified copper as a “core strategic asset” and are actively seeking acquisitions in the area. Alternatively, for a more diversified metal exposure, investing directly in BHP or Rio Tinto may be a smart choice.

Keep a close watch on how matters progress from here. Should China’s new COVID strategies impede economic progress and travel, or if the housing sector is still lackluster, it may be wise to take a more prudent course of action.

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Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. On average around 80% of retail investor accounts loose money when trading with high ...

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