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Breakthrough rally for Chinese stocks (finally)

Hong Kong
Philippe Lopez | AFP | Getty Images
Hong Kong

Breakthrough rally for Chinese stocks, finally

Hopes for Chinese stocks to break out of their multi-year doldrums amid an improvement in the economy were high in 2013, but that has proven to be a false dawn with equities just below the flat line for the year. However, 2014 will be different. The reforms unveiled by the country's leaders during the Third Plenum in November are said to be the boldest in more than three decades, and have already injected life into the markets. Case in point, baby-related shares have soared following the decision to relax China's controversial one-child policy, as part of the reforms. Will it be a comeback play for Asia's worst-performing market this year? Absolutely.

Asia's red-hot property markets will correct

A taper tantrum won't be the only reason why Asia's property prices will finally cool. Numerous housing curbs unleashed in Singapore, Hong Kong and China over the last few years are slowly wearing down persistent demand, while the prospect of higher interest rates and a flood of new homes hitting the market will inevitably take prices lower. The decline won't be drastic though – it will likely be in the single-digit percentage point as governments will pre-empt the likelihood of any collapse. Time to shop for homes, people.

Social, political unrest to escalate

Expect to see more tension, both domestic and geopolitical, across the region in the new year. The squabble between China and Japan over the disputed islands in the East China Sea will heighten as both parties refuse to stand down, dragging in multiple stakeholders like Vietnam, the Philippines, Brunei, Malaysia and Taiwan (incidentally all allies of the United States). Meanwhile, social unrest in China will gather momentum as its increasingly vocal population of netizens turns activist, protesting about everything from poor pay to bad air to government corruption. In the rest of Asia, political upheavals could be a theme with Indonesia and India elections in the pipeline and the anti-government protests in Thailand seeing no signs of abating.

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