HSBC: China to Lead Emerging Market Rebound on Economic Reforms

A top strategist at $419bn money manager, HSBC Global Asset Management, says China's raft of economic and social reforms have reinforced investor confidence in the country and the region is set to lead the emerging market rebound.

Speaking at a Reuters Global Investment Outlook Summit conference in Hong Kong, Bill Maldonado, the chief investment officer in Asia-Pacific for HSBC Global said China's reform agenda has reinforced confidence in Asia's biggest economy and now emerging markets are expected to catch-up with stocks in the developed world.

"Valuations and profitability are very good in emerging markets and right now developed markets are looking pretty fully valued," added Maldonado.

"China [will lead a rotation into emerging market stocks] because it's one of the cheapest emerging markets in the world and it's one of the most profitable."

China Reforms

On 15 November, China has unleashed a flurry of detailed economic and social reform plans in a bid to secure the country's future growth.

According to a document released by the Communist Party, following a four-day conclave of its top leaders, China said it plans to cut red tape by scrapping residency restrictions in small cities and townships, while also integrating urban and rural social security systems.

This includes the establishment of an exchange market for rural property rights transfers.

The country also pledged to accelerate capital account convertibility and push ahead with an environmental tax.

Among other economic reforms, China plans to set up a debt risk alert mechanism as well as standardising the way local and central government debt is managed.

Property tax and resource tax are also tipped to be accelerated.

The reform document was approved by the leaders after an initial communique revealed that the government promised to deliver "decisive" results by 2020.