Chinese Stock Surge Dampens Short-term Market Potential, Stimulus Fuels Optimism: BofA Survey Analysis

The shift towards Chinese stocks has turned more investors optimistic, yet the rally diminishes short-term gains: Bank of America survey

A rise in Chinese shares has drained the market's prospective growth in the coming six months, according to a survey by Bank of America.

Financial advisors in the Asia-Pacific region are growing increasingly positive about China's future. This comes as anticipation grows for more aggressive policy changes following Beijing's significant financial boost, as indicated by a Bank of America study. These managers have increased their investments in Chinese resources and reduced their stakes in India.

According to a US investment bank, a clear majority of 61% of fund managers are predicting the growth of the world's second-largest economy in the coming year, a significant shift from the previous negative 35% outlook. Consequently, the forecast for the Asia-Pacific region has also reached its highest level in 20 months.

The bank stated in a Tuesday report that China's growth prospects have revived due to a shift in policy. The report indicated that participants are now paying renewed attention to China, confident that this situation is unique. They are hopeful that Chinese households will increase their discretionary spending and investments, thus creating new opportunities.

The financial institution conducted a study with 128 local investment managers who are responsible for US$273 billion worth of assets, between October 4 and

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Significant fluctuations in stock markets of Hong Kong and mainland China

On September 24, China disclosed an enormous economic recovery plan aimed at revitalizing the economy and aiding the property and stock markets that had experienced a significant drop in prices this year, reaching multi-year lows. This strategic move contributed to a surge in the market, restoring over US$3 trillion in value to Chinese stocks that are traded in Shanghai, Shenzhen, Hong Kong, and New York.

The MSCI China Index, following more than 700 locally and internationally listed firms, has seen a 19 per cent increase over the previous month. Meanwhile, shares in Hong Kong have experienced a 20 per cent upswing, despite the performance being inconsistent and unstable.