China Strategy - Minimizing the contagion effect

■ The cooling down of the property sector and concerns about spillover effects from the recent credit event triggered selling pressure on sectors such as financials and upstream. ■ We maintain the view that the Chinese government is unlikely to ease tightening on property and related sectors in the near term (including financial companies with high exposure to the property sector), so they may remain under pressure. ■ The Chinese government is expected to manage the event carefully to minimize the contagion effect, as in mid-Aug 2021, it reiterated its message about preventing and defusing “major” financial risks and maintaining stable financial development in a positive way. The Sixth Plenum will kick-off in Nov 21; we may see a solution before this key event. ■ The Chinese government also released latest developments related to the Beijing Stock Exchange, and the CSRC’s broader criteria for red chip A-share listings is positive for brokerage names, such as CITIC [6030.HK], GTJA [2611.HK] and SWHY [6806.HK]. ■ The analysis in this report is based on industry and macro figures and may differ from the views of individual analysts, in some cases.