Europe’s biggest bank HSBC has joined several financial institutions to turn bullish on China’s equities despite concerns about the wider impact of the debt crisis at the property giant China Evergrande Group.

HSBC on Tuesday, Oct. 26, upgraded its recommendation on China’s stock market to “overweight” from “neutral,” arguing the worst of a regulatory storm has passed and that Beijing will provide policy support to arrest slowing growth, Reuters reported.

The bank claimed that the challenges facing the country have been factored in stocks’ prices.

“We think the baby is being thrown out with the bathwater,” the analysts at HSBC said in a report. “Yes, China is struggling with growth, and a stronger dollar is not good news for China’s stock markets. But that’s now well-known and is priced in.”

“As growth is slowing, we expect Beijing to introduce more targeted easing measures in the coming months,” they said.

“As for regulations, which have battered the China internet sector so much this year, they tend to come in cycles… the focus eventually shifts to growth and stability, especially heading into the twice-a-decade Party Congress next year,” the analysts added.

HSBC made the recommendations after China’s stock market has declined significantly due to the government’s crackdowns on technology and property sectors. The MSCI’s China index has dropped about 12% so far this year, bucking a 15% rise in MSCI’s world stocks index.

Despite a series of ongoing defaults in property companies due to fallout from the troubled Evergrande, HSBC said the beaten-down real estate sector is particularly attractive over the longer term, arguing that concerns about Evergrande may only weigh on prices for a while.

Evergrande narrowly averted a big default with a last-minute bond coupon payment last week. The group said on Sunday that it had resumed work on more than 10 projects, after halting them because it was unable to pay contractors.

But Evergrande’s financial woes, which has reeled the domestic and international markets, are not expected to disappear soon as the giant property developer has more than $300 billion in liabilities and a number of major payment deadlines ahead.

The contagion has been felt in the property sector with multiple property developers facing defaults in October. Modern Land has become the latest builder to default in China as it failed to repay the principal and interest on a $250 million offshore bond matured on Monday, Oct. 25, due to “unexpected liquidity issues.”

Despite the liquidity risks faced by property companies, HSBC recommended “buy” on some developers, such as China Resources Land, Longfor Group Holdings and Shimao.

Before HSBC, a few other institutional investors have reckoned the worst is over for China.

On Monday, Citi Private Bank strategists said they turned modestly overweight on Chinese equities, and Goldman Sachs also unveiled a portfolio which it said had been insulated from regulatory risks.

A month earlier, asset manager BlackRock also said it was dipping its toes back into the Chinese market.

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