Although Chinese stock bulls have endured another bad year, they could improve in 2023 if the country's sharp economic recovery after the lifting of Covid restrictions eventually leads to a strong economic recovery, according to Bloomberg..

The Hang Seng China Enterprises Index, which tracks Chinese companies listed in Hong Kong, has just experienced a third consecutive year of declines, a record losing streak since its inception in 1994..

The fall in 2022 was accompanied by a sharp increase in volatility, which was the worst since the global financial crisis and was the highest among the main benchmarks in the world. Cumulative losses from shares traded on the mainland and in Hong Kong reach $3.9 trillion.

But 2023, according to market experts, promises to be more successful, as the authorities returned economic recovery to the top priorities, stepped up efforts to rescue the ailing real estate sector and signaled support for private entrepreneurship..

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However, it won't be a smooth ride given challenges ranging from the messy exit from Covid-Zero to lingering tensions between the US and China and a looming global recession.. The market needs to be patient, experts say.

Chinese stocks experienced an epic upswing in November as Beijing began easing Covid restrictions and ramped up efforts to reduce debt risk among property developers.. Signs of declining hostility between Beijing and Washington have also lifted investor sentiment..

Renewed economic optimism has prompted a growing number of Wall Street banks to become more bullish on Chinese equities.

Credit Suisse Group AG was one of the latest to join the chorus, saying it was "

Although the recovery eased slightly in December on fears that rising infections will disrupt economic activity, asset managers like Amundi SA see any drop as a buying opportunity..

“For Covid, as brutal as the turnaround looks, it’s a short-term pain in one to two months and a long-term gain for consumption and industrial activity in six to nine months,” said Xiadong Bao, fund manager at Edmond de Rothschild Asset Management in Paris..

China's economy is expected to grow by 4.8% in 2023 as its global competitors face the dual threat of higher inflation and slower growth. Beijing's loose monetary policy, which contrasts with the Fed's hawkishness, and easing on private enterprises could give Chinese equities an extra boost.

The cheap valuation of Chinese companies also stands out. The MSCI China Index is worth about 10.6 times its 12-month earnings forecast, below both its emerging market peers and its own five-year average..

However, tensions with the US will remain a key source of market volatility.. While bilateral relations have shown signs of improvement in recent months, including a reduced risk of delisting Chinese companies from U.S. exchanges, there are still burning long-term issues, from semiconductors to human rights to Taiwan..

Weak housing market is another cause for concern. While a slew of bailouts have stabilized investor sentiment, analysts warn it will take months, if not years, for a full recovery.. This is due not only to low demand for housing, but also to the fact that many developers are still constrained by heavy debt obligations..

Overall, Chinese equities look good in 2023 with chances for further gains, although don't expect a smooth road..

As reported, China will lift mandatory quarantine requirements for visitors to the country from January 8, 2023 due to the COVID-19 pandemic.. The lifting of quarantine requirements is an important step for the full resumption of interaction with the rest of the world, which the government has seriously limited to prevent the spread of the virus..