China - Market Strategy 06 (Jul 24 - Dec 26)

[behappyalways]

A Chinese FOMO speculator.
https://x.com/HAOHONG_CFA/status/1843906580615778590

[winston]

China's briefing on stimulus gets lukewarm investor reception

CHINA said on Saturday (Oct 12) it will “significantly increase” government debt issuance to offer subsidies to people with low incomes, support the property market and replenish state banks’ capital.

Source: Business Times

https://www.businesstimes.com.sg/intern ... -reception

[winston]

What you need to know about investing in China’s volatile stock market

On Wednesday (Oct 9), the stocks suffered their biggest drop in more than four years as traders grew impatient over the pace of the stimulus measures.

Hang Seng Index of Chinese stocks listed in Hong Kong up roughly 25 per cent year-to-date.

The stimulus needs to be combined with more structural economic reforms, and a more positive attitude toward entrepreneurship and foreign investment.

The nation’s US$18 trillion economy has struggled to recover from a pandemic slump, with a debt crisis battering the property sector and consumer confidence plunging.

Plus, a global backlash against Chinese goods is denting the prospects of the manufacturing sector, and unemployment is rising.

The central bank will also provide at least 800 billion yuan (S$147.8 billion) of liquidity support for the nation’s stocks, and officials are looking into setting up a market stabilisation fund.

For major banks, authorities are considering injecting up to 1 trillion yuan of capital.

You would expect that the biggest parts of this stimulus would go to the larger, more liquid companies.

Source: Business Times

https://www.businesstimes.com.sg/compan ... ock-market

[winston]

BofA Recommends Buying CN Stocks on Dips

Bank of America (BofA) strategist Michael Hartnett recommended buying Chinese stocks on the dip.

With the upward revision of China's economic growth forecast and rising bond yields, he believed that asset allocation to China will escalate.

BofA, citing data from EPFR Global, said that investors poured a record US$39.1 billion into Chinese equity funds in the week ending 9 October.

Hartnett said Chinese government officials have hinted that capital markets will be actively used to entice domestic "animal spirits" and demand, so it is recommended to buy Chinese stocks on dips.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

China Strategy: Fiscal support direction unveiled but still awaiting details

The Ministry of Finance (MOF) announced the much-anticipated fiscal stimulus policies at the press conference on 12 October.

While there was no specific mention regarding the size of the fiscal stimulus package, which may disappoint the market, there was some positive forward guidance.

We have been reiterating that any budget expansion will need the National People's Congress (NPC) approval and the focus should be on the upcoming NPC Standing Committee meeting in end-October to early November.

We believe these stimulus policies will support the economy by addressing and containing the two major risks in the economy, namely: local government debt and real estate market.
The positive surprises come from clear forward guidance on fiscal expansion in the next few years, and more central government debt financing.

However, the lack of details of the size of fiscal stimulus and no specific mention in consumption support would be a disappointment.

Valuation of major market indices have more or less recovered to the historical average levels since 2014 except HSTECH Index and ChiNext Composite Index.

We believe equities markets may be poised for further consolidation and sector rotation in the near-term. That said, we believe the market would stabilise and rebound when more clarity on the size and direction of the fiscal stimulus package is unveiled after the NPC Standing Committee meeting.

Despite that, earnings and fundamentals will take time to demonstrate improvements and recovery, we believe upside potential is possible if fiscal policy support measures are to follow in a timely manner, supporting an earnings-driven market rally with economic recovery.

We maintain our preference to HKEX (388 HK) and large-cap, index-heavy internet and platform companies with improving revenue and earnings outlook, and commitment to share buybacks.

We believe Chinese banks would be a key beneficiary as most of the fiscal stimulus policy directions will lower banks’ interest rate risks and asset quality risk.

The fiscal stimulus direction also helps housing inventory destocking and should accelerate the bottoming of real estate cycle.

Source: OCBC

[winston]

Australia’s largest pension says China boom times have finished

By Amy Bainbridge

China’s latest bout of stimulus may help stabilise the country’s property crisis but investors should position for the end of the economy’s boom years.

The economy’s annual growth rates of near 9% were in the past, and he was instead expecting still “not too bad” numbers, starting with four or five.

Housing slumps in other countries have taken “decades to work their way through such as Japan in the 1990s.

Source: Bloomberg

https://theedgemalaysia.com/node/730196

[winston]

These Stocks Will Likely Keep Soaring From Here

by Brett Eversole

The HSCEI has rallied 27% off its recent low in September.

Similar setups led to 10.2% gains in three months, 15.3% gains in six months, and 21.5% gains over the next year. Plus, the HSCEI was up 82% of the time a year later.

History shows that the recent move is a good sign. Chinese stocks will likely keep soaring from here. And that makes this a market you need to consider owning right now.

Source: Daily Wealth

https://tradesoftheday.com/2024/10/16/t ... e_vignette

[winston]

Stimulus package may prove different this time

By XIONG YI

This stimulus package is different because of its comprehensive scale and good timing, strategic focus on reviving market sentiment by supporting asset prices and clear commitment to further action if needed.

We estimate the total size of the stimulus could potentially exceed five trillion yuan (US$705.52bil).

Willingness of the People’s Bank of China to accept riskier assets, such as stocks and stock exchange-traded funds, as collateral for liquidity operations.

The total size of China’s fiscal and monetary stimulus could reach 7.5 trillion yuan, or 6% of gross domestic product (GDP), in 2024.

Source: China Daily

https://www.thestar.com.my/business/ins ... -this-time

[winston]

China Strategy: Potential beneficiaries of the swap facility

At the end of September, financial regulators announced setting up a swap facility for brokers, funds and insurers, i.e. non-banks financial institutions (NBFI) as part of the policy trio release.

The initial quota was set at CNY500b and could be upsized. To put into perspective, the initial size of CNY500b is more or less similar to the estimated net buying by the “national team” into A-share ETFs from January to mid-September this year.

About two weeks after the announcement, the People’s of Bank of China (PBoC) launched the Securities, Funds and Insurance companies Swap Facility (SFISF), which started to accept applications. Media reported that about 20 NBFIs have submitted applications, including CITIC Securities (6030 HK) and CICC.

NBFIs are likely to have higher leverage and exposure to equity market in light of the SFISF. We believe NBFIs may potentially allocate more investment in high dividend stocks, state-owned enterprises (SOE) and large-cap and index-heavy constituents so as to lower volatility of their equity investment and have a higher chance to cover cost of investment.

We screen A-shares under BOS-HTI coverage that could potentially benefit from the SFISF as shown in Exhibit 2 and the key screening criteria are:
i) trading at or below 1.0x forward price-to-book,
ii) offering at least 2.5% dividend yield so as to at least cover the funding cost, and
iii) having a Buy rating.

Over the past two weeks, various press conferences were held to highlight stimulus directions unveiling fiscal support directions. The market is waiting for details of the size of fiscal stimulus and whether there will be more to unfold regarding consumption support.

Media reported that CNY6t may be raised from the issuance of ultra-long special CBGs over three years to partly help local government debt resolution.

The upcoming National People’s Congress Standing Committee around end-October to early-November will be one of the key events to watch out for.

Valuation of major market indices have more or less recovered to the historical average levels since 2014 except HSTECH Index and ChiNext Composite Index as shown in Exhibit 1.

We believe equities markets may be poised for further consolidation and sector rotation in the near-term.

Despite that, earnings and fundamentals will take time to demonstrate improvements and recovery, we believe upside potential is possible if fiscal policy support measures are to follow in a timely manner, supporting an earnings-driven market rally with economic recovery.

Source: OCBC

[behappyalways]

Long Chinese Stocks' Is Among Most Crowded Trades
https://x.com/zerohedge/status/1847000918421549081