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China: What could drive its markets in 2023
Victor Kohn
Equity Portfolio Manager
Steve Watson
Equity Portfolio Manager
Andrew Lee
Investment Director
January 27, 2023

As nearly three years of lockdowns come to an end in China, will 2023 be a turning point for equity investors?


Without a doubt, China’s equity risk premium is higher than other markets. As investment professionals with more than 25 years of experience following China, we believe the higher premium is due to the government’s repeated intervention and influence in the economy and markets, as well as geopolitical uncertainty. We also recognise that China’s economic recovery could be uneven and trade-related tensions with the US will likely persist.


However, China’s equities markets have been rallying this year on the country’s abrupt departure from strict COVID policies. Some sectors have been buoyed by more supportive measures for the property market and encouraging regulatory developments for technology companies.


We have learned from experience that volatility can mask buying opportunities in China. We believe this could be one of those times, particularly for select companies well positioned for an economic rebound, but also for those that remain aligned with the Common Prosperity goals of the administration.


In this paper, we look at a few key themes to consider for investing in China and why we are constructive. China’s video game platforms, payment systems and e-commerce have been areas of tremendous innovation over the past decade, and this should continue to drive growth.


Stock picking in China has been crucial over the past decade

China MSCI

Past results are not a guarantee of future results.

As at 31 December 2022. Data reflects price level on net basis. Sources: MSCI, RIMES 

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Risk factors you should consider before investing:

  • This material is not intended to provide investment advice or be considered a personal recommendation.
  • The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
  • Past results are not a guide to future results.
  • If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful.
  • Depending on the strategy, risks may be associated with investing in fixed income, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.

Victor D. Kohn is an equity portfolio manager at Capital Group. He is president of Capital International, Inc. He has 38 years of investment experience and has been with Capital Group for 37 years. He holds an MBA from Stanford Graduate School of Business and both master’s and bachelor’s equivalent degrees summa cum laude in industrial engineering from the Universidad de Chile. He also holds the Chartered Financial Analyst® designation. Victor is based in Los Angeles.

Steve Watson is an equity portfolio manager at Capital Group. He has 35 years of investment experience and has been with Capital Group for 33 years. He holds an MBA in finance from New York University Graduate School of Business Administration, a master’s degree in French studies from New York University Institute of French Studies and a bachelor’s degree in French from the University of Massachusetts graduating cum laude. He also studied Mandarin Chinese at Wuhan University and the Shanghai Foreign Language Institute in China. Steven is based in Hong Kong.

Andrew Lee is an investment director at Capital Group. He has 13 years of industry experience and has been with Capital Group for three years. He holds a bachelor's degree in business administration with accounting and marketing from the Hong Kong University of Science and Technology. Andrew is based in Hong Kong.

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Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.

Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.