Tide may be about to turn: Why the service sector holds the key to China's recovery

Deep Dive into Chinese equities

The narrative of 2020 equity market losers becoming 2021 winners has played out so far this year with the rotation out of growth stocks and into value and more cyclical parts of the market.

This theme is also evidenced by China's notable reversal of fortunes. Since mid-February, the CSI 300 index of Shanghai- and Shenzhen-listed stocks has fallen 12%, three times the MSCI Emerging Market index which has lost 4% over the same period. That is a far cry from the 50% absolute/20% relative return achieved over the prior 12-month rolling period. This pivot can be attributed to several factors. First and foremost China is at a different point of the economic cycle. Having handled the pandemic far better than many of its peers, policymakers are now normalising monetary policy at a ...