Chinese stocks look ready to outperform with COVID-easing catalysts on deck, Europe's top asset manager says

• Amundi, which oversees $2 trillion in assets, is bullish on Chinese stocks after cutting exposure during the sell-off.
• Europe's top asset manager is watching for Beijing to roll out a homegrown COVID-19 vaccine and ease virus curbs.

Europe's leading asset manager Amundi has turned bullish on Chinese stocks, saying they are set to outperform given the potential developments around COVID ahead.

Amundi, which manages $2 trillion in assets worldwide, is watching for China to roll out a self-developed vaccine, the firm's CIO Vincent Mortier told Bloomberg. He added it's also waiting to see whether the government moves to reopen from COVID-19 containment restrictions at the Party Congress in the second half of 2022.

Those developments would be important catalyst's for China's stocks, Mortier said, per Bloomberg's report Monday.

"It's more a question of when will it happen, not if it will happen," Mortier said. "To be underweight Chinese equities today is risky. It's better to be overweight because medium-term, we think there is value."

Beijing's zero-COVID policy has hit its economy hard, after the government in March imposed harsh restrictions to contain a surge in infections.

Businesses in the manufacturing and commercial hubs suffered, since factories were shuttered and workers were confined to their homes. Truckers struggled to move goods in and out of the city's huge port due to restrictions on movement.

Amundi cut its exposure to Chinese stocks in the first quarter of 2022, during a stock sell-off driven in part by uncertainty about local regulators' plans to clamp down on large enterprises. Investor jitters over the US Federal Reserve's approach to monetary tightening and interest-rate hikes also played a part.

The Shanghai Composite Index has fallen almost 13.5% year to date, while Hong Kong's Hang Seng Index is down 9.7%.

Over the weekend, the Chinese government moved to ease restrictions. Shanghai said it would lift curbs on businesses on June 1, and Beijing reopened some public transport services.

Mortier said Amundi was wary of investing in stocks in China's tech companies, given their earnings are exposed to the actions of local regulators. It's not clear whether these pressures will increase and where they will be focused.

"Given the lack of visibility, even if the prices have corrected, we cannot say today they are cheap," Mortier said.

Amundi is more keen on shares in mainland Chinese companies involved in the country's healthcare, consumer discretionary and industrial sectors, he added.

The asset manager's China equity has dropped 22% in 2022 so far, performing better than two-fifths of its peers, according to Bloomberg. The fund has more than $550 million in assets under management.