China’s economy has showed signs of stabilizing, making fears it could implode seem less realistic. But longer term economic challenges and geopolitical tensions are keeping investors wary, which could limit any recovery in battered Chinese stocks.
Retail sales have seen a bounce and the firm’s index of Chinese economic activity was picking up. Still, pockets of weakness persist: Manufacturing activity in October dipped back into contraction territory and construction activity slowed because the property sector is still struggling. As a result, he said, the medium- to long-term outlook is uncertain even if the odds that the economy can grow at 5% in the near term have improved.
For some strategists, including DataTrek Research’s Nicolas Colas, it makes sense to favor U.S. over foreign stocks broadly. He said in a research note that non-U. S. stocks have had a lousy record versus U.S. stocks since 2010.