Investors have been hit by a perfect storm in 2022. The Asian market, as represented by the MSCI Asia ex Japan Index, has declined 32% in the first ten months of 2022.1 China, which accounts for about a third of the regional index, was down by an even bigger magnitude, plummeting 42%.

The perfect storm, in our view, is more devastating than the global financial crisis in 2008. But at the same time, we believe the outlook is not all gloomy, as there are some bright sides that the market might have overlooked.

Meanwhile, valuations in Chinese equities are at a historically low range. We believe that the central government will announce clearer economic policy direction and supportive measures. In addition, as the government fine tunes zero-Covid toward reopening, Chinese equities are expected to recover gradually from their bottoms, and re-ratings should be warranted when sentiment improves.

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