London (CNN Business)For investors, the appeal of China has always been clear. Despite a long list of political risks, it's the world's second-largest economy — home to a massive pool of consumers and the fastest expansion of the middle class in history.
But in the past 12 months, there's been a significant shift.
What's happening: One year ago this week, Ant Group halted its highly-anticipated stock market debut following a meeting between billionaire co-founder Jack Ma and Chinese regulators. In the months that followed, Beijing ramped up efforts to curb the power of some of the country's most powerful companies, from online shopping behemoth Alibaba to ride-sharing platform Didi. The campaign has wiped out trillions of dollars in market value.
That crackdown has forced money managers to ask tough questions. Chief among them: Is the market still the blockbuster bet they thought it would be?
Apprehension remains about what President Xi Jinping will do next as he pursues a national campaign for "common prosperity." But after a tumultuous year, some of the anxiety is wearing off.
"Sentiment is starting to recover ... on signs Beijing is attempting to strike a balance between stabilizing growth and pursuing structural adjustments," Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note to clients this week. "We believe Chinese equities are close to the bottom now."
See here: Last quarter, Chinese stocks suffered their worst three-month period since 2015, plunging over 18%, Haefele noted. But in October, the MSCI China index rose 3%, ending four consecutive months of losses. Alibaba's stock, which has been particularly hard hit, jumped almost 15%.
The change in mood is largely attributable to expectations that the Chinese government will moderate efforts to reform private companies to avoid exacerbating an economic pullback.
The country's output grew at its slowest pace in a year last quarter, expanding just 4.9%. Compared to the prior quarter, the economy grew only 0.2% in the July-to-September period — one of the weakest quarters since China started publishing such records in 2011.
A government survey of manufacturing activity released over the weekend fell for a second straight month. There are also worries that the country's massive property sector could buckle under its huge debt loads.
That's boosting expectations that policymakers will act aggressively to inject stimulus into the economy to help it stabilize.
But the clouds haven't cleared entirely. Haefele notes that "near-term market volatility may remain high." In Bank of America's most recent survey of global fund managers, the situation in China was identified as the second biggest market risk, behind only inflation.
On the radar: An energy crunch hammering China could dictate how the situation unfolds. So could its approach to dealing with the Covid-19 pandemic.
As countries around the world gradually open up, China is still working to eradicate Covid-19 from inside its borders. On Sunday evening, Shanghai Disneyland went into a snap lockdown following a single confirmed case. Tens of thousands of visitors and staff were forced to undergo coronavirus testing before they were allowed to leave the park.