China stock investors eye better 2023 after $3.9 trillion rout

While China stock bulls had another miserable year, their fortunes may finally improve in 2023 if the nation's abrupt reopening from Covid curbs eventually leads to a robust economic recovery.

The Hang Seng China Enterprises Index, which tracks Chinese firms listed in Hong Kong, just suffered a third straight year of declines, a record losing streak since its inception in 1994. The slump in 2022 was accompanied by spiking volatility that was the worst since the global financial crisis a  

and ranked the highest among major benchmarks in the world. Combined losses from stocks traded on the mainland and in Hong Kong reached $3.9 trillion

But 2023 is shaping up to be a better year, market pundits say, now that authorities have put economic revival back as a top priority, ramped up efforts to salvage an ailing property sector and signaled more support for private enterprise. It won't be a smooth ride though

given the challenges from a messy Covid-Zero exit to lingering US-China tensions and a looming global recession.

Market needs to be patient," said Vivian Lin Thurston, portfolio manager at William Blair Investment Management. Sentiment toward Chinese stocks has room to improve further, but the process could be gradual and "with possible setbacks and volatility," she added.

Chinese shares staged an epic rebound in November, when Beijing started relaxing Covid restrictions and increased efforts to defuse debt risks among property developers. Signs of reduced hostility between Beijing and Washington also brightened investor mood.

Renewed economic optimism and attractive valuations have prompted a growing number of Wall Street banks to become more bullish on Chinese stocks.

Credit Suisse Group AG was among the latest to join the chorus, saying that the "time has come" to turn constructive on Chinese shares and upgrading them to outperform from neutral.