The Chinese government’s efforts to tamp down speculation in property markets will mean that funds will flow to equities instead, allowing for more upside in onshore equities, an economist said on Tuesday.
“We think the liquidity will likely go to the equity market,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
Although real estate has been the favored investment choice of the general public, the Chinese government is now cracking down on market exuberance to prevent a bubble, Zhang told CNBC’s “Street Signs Asia.”
In July, the city of Shenzhen announced fresh restrictions on home purchases to curb sharply rising prices and stamp out speculation.
“That sent a very strong signal to investors (to) don’t speculate in the property market, then equity became the only option available for the general public,” said Zhang.
Zhang said the Chinese government is trying to manage reforms for the equity markets and welcome a slow growth market.
They don’t want “to allow leverage to build up too much and they hope this kind of rally can go on for more than a year or even longer,” said Zhang.