Shares in China are not overvalued despite substantial gains over the past six months, said DBS chief executive Piyush Gupta yesterday.
Mr Gupta told a clients' lunch that Chinese stock indexes had remained "dead in the doldrums" over recent years while the economy was growing at a robust 7 per cent.
"The stock market actually had a lot of catching up to do. The fact that it went up 80 to 100 per cent (in the past months) was appropriate because it was catching up," he added. "I don't think there is any fundamental mismatch or mispricing in the overall structure of the Chinese market."
Mr Gupta said he expects to see more volatility in Chinese asset prices as the country further liberalises interest rates and allows foreigners to access its capital markets.
"As you wind up with greater financial liberalisation, you will see greater swings in money flows and freedom to price," he said.
DBS chief investment officer Lim Say Boon said at the gathering that "the bull market is likely to resume". He added that as long as the Chinese government kept interest rates and the reserve requirement rates accommodative, the strong run in the equity market would persist.
"In the last two cycles, the market reversed when the central bank started to hike the reserve requirement ratio and the lending rates. I cannot see the central bank hiking either of them for the foreseeable future," said Mr Lim.
A strong market encourages Chinese consumer spending at a time when the economy "remains sluggish", he said. It also enables companies to raise capital to buy out the "huge amount" of non-performing loans in the Chinese economy.
Mr Lim noted that DBS favours Chinese H shares - those listed in Hong Kong - over A shares, which are listed in Shanghai or Shenzen, as valuations were lower and so more attractive.
Mr Isaac Souede, chairman and chief investment strategist of Permal Group, said he saw a buying opportunity in Chinese banks as they had not participated in the equity rally of the past 12 months. The government would focus on cultivating a vibrant banking sector as this was key to structuring China's economy towards consumption and away from investment, he added.
Mr Souede said the banks are "critical in putting forth the image of China everywhere" as they expanded globally. So it was important for the Chinese to ensure these banks are "world-leading institutions".
Mr Gupta also addressed the Singapore economy, suggesting the property market would reach bottom in the next three to six months. He added that getting the economic restructuring right in the next few years was important for Singapore. He cited the Smart Nation programme, which could enable Singapore to stand out from its neighbours in the long term in terms of infrastructure.
"I think the Smart Nation project allows us the capacity to create the world's first future city in a world that is still not digitised and ready for it. If we can get this right, we will wind up again creating a 20-year gap between us and any other city in the world," he said.