China's A-shares are expected to outperform the rest of the world's equities markets in the coming months, even as mainland businesses begin to recover from the COVID-19 outbreak, according to Jimmy Zhu, chief strategist at Fullerton Research.
China's fundamentals have remained intact, even as Wall Street witnessed its biggest selloff since 1987, while most benchmark indexes in Asia were in the red on Friday.
"I think in the coming few months, at least in March, Chinese equities will relatively outperform the rest of the market," said Zhu.
"The fundamentals of the Chinese market are pretty attractive. I think the main focus of the market is all about the coronavirus impact. When we look at the recovery and the virus control, it looks like China has done a pretty good job," Zhu told CGTN.
Zhu noted that production in China may have recovered close to 60 to 70 percent of previous capacity, judging from the trading volume of the yuan. An estimate by Bloomberg showed that close to 80 percent of China's businesses are back to normal operations.
However, he said that globally, it was difficult to see whether the global rout has seen its bottom. A "V-shaped" recovery is possible, and it depends on whether the spread of the coronavirus worldwide continues.
"I don't see the market reaching the bottom [yet]," he said, adding that "I think at this point, the market is moving according to the momentum. There are not much fundamentals priced in the market at this moment."
"I won't be surprised if suddenly in the next few weeks, we'd see a V shape recovery, as long as the virus eases around the world."
Gold no longer a safe haven
Meanwhile, Zhu said that gold, which has fallen by over 6 percent for the week – its highest weekly fall in seven years – is no longer a safe haven.
"Gold is very confusing at this moment. It is no longer a safe haven asset," said Zhu, adding that with the oil prices applying pressure on world inflation, it could push commodities including gold even lower.
On the U.S. markets, Zhu said that the Federal Reserve actually has very limited options, despite a recent massive injection of 1.5 trillion dollars to address liquidity concerns in the U.S. treasury markets.
As for oil prices, Zhu predicts that it will hit 25 dollars per barrel in the next few months, given the lack of global demand and OPEC's failure to reach an agreement on production levels.
"I think at this moment right now the production level is pretty worrying," he said. A price drop to 25 dollars per barrel in a few months time will be "because the global demand is simply not there," he added.