We have been cautious on China last year and until 9th May this year, but have at that point turned positive, advising to add to CSI. The China market has done poorly ever since February 2021, the regulatory uncertainty appears to be reducing, the big tail risk of zero COVID lockdowns is in the open, with some easing in restrictions likely, there is a probable further stimulus ahead, and the activity hurdle rate in 2H is likely exceptionally favourable
In November we upgraded UK to OW, for the first time in six years, taking advantage of its six years of underperformance. The UK is trading at a record discount vs other regions, even when Value sectors are taken out. UK offers the highest dividend yield globally, which is, in our view
Eurozone is trading not far from a record discount to the US, last seen during the worst point of the Eurozone sovereign crisis. The Eurozone backdrop appears encouraging with respect to the underlying pace of growth, relative to other regions, despite the geopolitics hit. The Recovery Fund began to be implemented and the labour market is strong, with fresh lows in the unemployment rate. We believe that ECB will be successful in keeping peripheral spreads under control. Within Eurozone, we prefer domestic plays to exporters, and periphery to core
Stand neutral Japan and U.S., the latter could keep stalling vs other regions over the medium term if Tech out performance keeps waning, but should be a safe haven during the extremes of the geopolitical uncertainty
- J.P. Morgan Strategy
*Report date 09/05/22
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