China Strategy – looking beyond the 20th Party Congress
The 20th Party Congress concluded with the Politburo Standing Committee unveiled on 23 October.
The total number of Standing Committee members stayed unchanged at seven, with four newly appointed members. the new economic team will be unveiled at the NPC.
After the long-awaited leadership reshuffling has been settled, policymakers could refocus on economic growth. Policy coordination & execution could become more efficient with less confusion.
President Xi's speech at the 20th Party Congress was more balanced & did not offer major surprises vs market expectations; reiterating reform, opening up & high-quality growth – i.e. economic development remains as one of the top priorities.
Key milestone and signposts to watch out for would include:
November: President Xi will attend the G20 summit, setting the stage for a potential meeting with the US President Biden;
November–December: a potential announcement of preliminary findings by the Public Company Accounting Oversight Board for American depositary receipt auditing. Any potential constructive findings could soothe some of the market concerns about US-China tensions;
December: the December politburo meeting in early December & the Central Economic Work Conference in mid-December could offer a first glimpse of the transition in the economic team & highlight priorities for economic work in 2023;
Key signposts for potential adjustment in dynamic zero-Covid strategy, which would offer:
i) boosting vaccinations among high-risk groups &
ii) enhancing availability & variety of domestic Covid-19 treatment medication and facilities;
March 2023: the government appointments at the NPC, which will be driven under the new leadership team.
Following the conclusion of the 20th Party Congress, HK & Chinese onshore and offshore equities markets corrected 3-6% yesterday.
The equities market appears to discount for a low growth with no re-opening assumption for next year.
Chinese equities are trading at a level that is comparable to previous trough levels & long-term investment value emerges.
We believe the market awaits for
i) further clarity regarding signs of further mobility easing, which should help support stronger earnings growth, &
ii) policy measures to be introduced under the new leadership team, which we believe the upcoming CEWC in December could shed more lights & directions.
Source: OCBC