SINGAPORE: Chinese stocks are fast emerging as a relative safe haven as a month-long war in the Middle East saps global risk sentiment, with investment banks increasingly bullish on a market that has held up better than its regional peers in March.
Markets have been rattled this month after the Iran war effectively shut the Strait of Hormuz, a chokepoint for about a fifth of global oil and gas flows, sending crude oil prices surging and weighing on equity markets worldwide.
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J.P. Morgan listed China as its most preferred market in the region this month, citing the country’s low dependence on Gulf energy and ample fiscal support capacity.
HSBC remained “overweight” on China, saying the market offers defensive qualities underpinned by a largely domestic investor base and a stable currency.
China’s benchmark Shanghai Composite Index has lost 6% so far in March, compared with an 18% drop in South Korean stocks and a roughly 13% decline in Japan’s Nikkei.
BNP strategists said China’s relative outperformance versus the rest of Asia will likely become increasingly pronounced the longer the US-Israel war with Iran drags on.
Strategists at Goldman Sachs said the Chinese economy appears better positioned than several global peers to weather the oil supply shock, pointing to years of energy diversification, rising strategic oil reserves and access to supply from outside the Middle East.
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