Standard Chartered Money Insights · Sep 29, 2026 · 4 min
With Raymond Cheng, Chief Investment Officer, North Asia at Standard Chartered Bank
Standard Chartered cut China equities from overweight to core holding in its Q4 Global Market Outlook, published the week before this recording.
China valuations look inexpensive after a year of underperformance, and consensus still expects double-digit earnings growth. Raymond Cheng downgraded anyway.
"But this move could cause many mainland investors to raise funds in the next couple of weeks for their unexpected tax payments, possibly through selling stocks that they own and then playing equity market sentiment in the near term." — Raymond Cheng
Cheng runs Standard Chartered's CIO office for North Asia and wrote the China call in the bank's Q4 Global Market Outlook.
The full episode is covered here so you can skip it.
Here are the 4 calls that matter.
Key Takeaways
China equities cut from overweight to core holding, despite cheap valuations and double-digit consensus earnings growth
August retail sales rose just 0.4% year-over-year; fixed-asset investment fell 7.2% over the first eight months
The Trump-Xi summit delivered no positive catalyst
A new tax bulletin gives offshore wealth trust holders until the 22nd of next month to self-declare back taxes
Cheng expects some mainland investors to sell stock to raise the cash
Banks can now only lend against already-built homes, squeezing developers' resale proceeds
Property lending reform and new share placements threaten to dilute earnings per share
Tech companies may issue more stock to fund AI capex
Some shareholders may sell to fund tax outlays under the new trust rule
The 12-month Hang Seng Index target is cut to 26,600, down from 28,000
Recommends tilting toward quality dividend stocks in financials and telecom
Keeps "moderate exposure" to growth equities in technology and materials
1. Cutting China Anyway
Standard Chartered's Q4 Global Market Outlook downgraded China equities from overweight to core holding, a call Cheng said might look strange given how the market is priced.
China looks cheap and earnings estimates are still strong, he said, and he downgraded regardless
"Some may find this intriguing at the outset as valuation there looks inexpensive at a time when China equities have underperformed year to date." — Raymond Cheng
The first reason is the domestic economy. Retail sales and investment data both came in weak, and neither policy nor last week's meeting between Presidents Trump and Xi gave the market a reason to look past it.
Retail sales and investment are both slowing, with no policy clarity to offset it
"First, economic outlook in China remains challenging. Domestic demand has been subdued with August retail sales up only 0.4% year-over-year and fixed asset investment also extending its decline, down 7.2% year-over-year for the first eight months of the year." — Raymond Cheng
"And the Trump Xi summit last week did not deliver any notable positive catalyst either." — Raymond Cheng
