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Tech Equities Remain ‘Cheap’ Despite Rebound in Liquidity

CHINA
  • Yesterday, aggregate financing came in larger than expected in March, up 4.65tr CNY (vs. 3.55tr exp.), leading to a strong uptick in the annual change in ‘liquidity’ (defined as the TSF 12M sum).
  • As the renewed lockdown policies imposed to major cities (i.e. Shanghai) have been dramatically weighing on the real economy and domestic risky assets, China officials have been sending clear easing signals to loosen financial conditions and stimulate the economic activity and asset prices.
  • Interestingly, tech equities, which have historically been very sensitive to the dynamics of liquidity, still appear 'cheap' relative to historical levels.
  • The chart below shows the strong divergence between China liquidity and tech equities (YoY change) since the start of the year.
  • One major risk of equities in the short run is the renewed geopolitical tensions with the EU preparing for more sanctions against Russia.

Source: Bloomberg/MNI

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