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In May this year, Trump was already signaling openness to decouple with China after first blocking a transferal of U.S. federal retirements fund investments mirroring a broad index by MSCI. He has made repeated public attacks against the Hong Kong bourse saying that it will never succeed under Beijing’s leadership «as opposed to the thousands of geniuses that ran it». 

More recently, Washington added another hit to Chinese equities by banning investments into companies believed to be aiding the country’s military such as surveillance firm Hikvision and semiconductor maker SMIC. Some of the affected firms, like China Telecom and China Uncom, issued statements warnings about the impact to stock prices while major indices by S&P DJI, FTSE Russell and Nasdaq have already removed some shares.

Bullish Banks

Despite the hurdles ahead, banks remain optimistic about Chinese markets. Pictet Wealth Management’s head of asset allocation and macro research Christophe Donay expected economic opening to lead to «further inclusion in benchmark indices and investor allocations», adding that investing in emerging markets is becoming increasingly synonymous with investing in China.

«We believe we should be cautious in the near term but bullish on 2021,» said UBS’s global research china strategist Wendy Liu, highlighting increase allocation due to property investment constraints and improved market reforms. 

«From a regional perspective, Chinese equities remain an interesting uncorrelated investment,» added Lombard Odier’s head of equity strategy Matthieu Bellamy.