Lombard Odier Remains 'Neutral' on Chinese Stocks

What's really been interesting has been the dual reaction of Japanese assets both in the wake of the BOJ and the Fed, right? We're seeing the Nikkei 225 surpassing that March 7 level to set that new intraday record. We're also seeing sustained weakness in the yen despite broad-based weakness in the dollar. What more do investors want to see from the Bank of Japan to be able to change that narrative? Well, in the very near term, after this move, the Bank of Japan is unlikely to make additional adjustments. They just made still a landmark decision in the March monetary policy meeting. So it's natural for the central bank to put things on hold for a while and see how the economy reacts to it. The market assessment is that it was a dovish hike. And in our view, it's actually a pretty well-managed dovish hike given that it's the first change the country has seen from monetary policy in nearly a decade, especially for the negative interest rate policy. So it's, you know, given that it's a dovish hike, it's possible for the markets to try to push the dollar yen higher. And if that's the case in the near term, the equity market momentum could still remain positive. Now, we're not ruling out the possibility of another hike. We actually agree with the market consensus that there's a scope for, you know, additional 10 to 20 basis point hike in the remainder of the year, especially if wage growth remains pretty positive, which means that eventually in the middle of the year, you will see that improvement in real income for households, which is positive consumption. So we'll see. And of course, excessive weakness in yen might be a trigger for the Bank of Japan to adjust its policy. This was a risk management move. But if the economy remains strong or the currency weakens a little further, then we do think that the additional rate hike, maybe 10 basis point hike is in play in the second half of the year. Of course, there's a lot of focus on on attractive entry points for other markets as well. China equities starting to stir perhaps a little bit more investor interest. What's your what's your view on that? Would you jump in at this point? We remain neutral on Chinese equity market. The technical rebound we have seen in the market, given the market interventions by the authorities, that's not particularly surprising. And, you know, when you have a neutral position in the portfolio against the benchmark, you still benefit from that rebound. But is it worth chasing this rally from foreign investors perspective? It's still quite difficult. Yes, we have gotten some positive data releases for the January and February period. But just in terms of the policy framework that the authorities are still maintaining, it's still quite piecemeal. We have seen another hint of that from the decision not to change the loan prime rate this week and, you know, the medium term lending facility rate the week before. And on top of that, it's possible January, February numbers were slightly exaggerated by the working day adjustment issues. So overall, you know, yes, we have the improvement in the volume of activities, but for the price momentum, we still don't see a convincing game changer yet. So we are basically neutral on the market and see if the retail activities improve further in China. But that's not the case in our view.