Macro strategy
One Asia Monthly Wrap-up - January 2022
> HK/China - an exasperating 2021 for investors

The MSCI China declined in December due to: 1) continued regulatory pressures, especially in the technology sector; and 2) fears of US sanctions on Chinese companies.

On the regulatory front, the China Securities Regulatory Commission (CSRC) said that it would set up a registration system to govern overseas IPOs and fundraising by mainland Chinese companies. Moreover, firms operating in industries that are off-limits to foreign direct investment will have to obtain a waiver from regulators before proceeding with offshore listings; the National Development and Reform Commission (NDRC) and the Ministry of Commerce unveiled the new rules, along with the negative list of restricted industries, on Dec. 27.

Meanwhile, on Dec. 17, the Bureau of Industry and Security (an agency of the US Department of Commerce) said it would add a number of Chinese companies to its Entity List, meaning that sales to these companies will now be subject to specific license requirements. The announcement targeted China’s efforts to develop and deploy biotechnology.

2021 was an exasperating year for investors in the Hong Kong/China markets, with the HSI and the CSI 300 being among the worst performing indices globally. While we find the markets’ continued underperformance puzzling, we are also cognizant that many investors are underweight on China and that liquidity flows can easily turn around in 2022 should negative regulatory news flows subside.

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One Asia Research Team

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