China - Market Strategy 04 (Aug 18 - Jan 23)

[winston]

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

[winston]

Alpha Picks: November Conviction Calls

Chinese equities should remain volatile in November as we see hopes of easing
pandemic control measures playing out against a backdrop of falling global dollar
liquidity.

We add a combination of defensive plays and beneficiaries of reopening.

We add CR Beer, CSPC, Meituan, PICC P&C, and WuXi AppTec to our BUY list; and add
MicroPort Scientific to our SELL list.

Source: UOBKH

https://research.uobkayhian.com/content ... ddf3b5cde9

[winston]

How a mysterious China screenshot spurred a US$450b rally

First began circulating on Monday night in WeChat social messaging groups filled with analysts and fund managers.

"It’s rumored that Beijing will soon establish an expert team to put together a “conditional reopening plan.” The goal is to materially reopen the country by March next year. The upcoming 10th edition of covid guideline is widely expected to provide upside surprises".

Source: Bloomberg

https://www.theedgemarkets.com/article/ ... 450b-rally

[winston]

China Stocks May Rally 20% on a Full Reopening, Goldman Says

by John Cheng

An increase in flights and growing adoption of an inhalable vaccine developed by CanSino Biologics Inc. are encouraging news.

Goldman economists expect the government to start to relax rules in the second quarter of 2023.

The market will pre-trade any actual reopening about a month in advance, and the positive momentum may last for two to three months.

Domestic cyclicals and consumer sectors will be the major beneficiaries.

Source: Bloomberg

https://finance.yahoo.com/news/china-st ... 47688.html

[winston]

CHINA STRATEGY – A TURNING POINT

Last week saw the relaxation of Covid-19 measures & treatments from the latest Politburo Standing Committee (PSC) meeting.

Coupled with the better-than-expected US inflation data & bond yield moderation, this has led to a rebound & short covering in the equities markets.

The Hang Seng Index, MSCI China Index (offshore Chinese equities) & CSI300 Index (onshore equities) rising by more than 11%, 8% & 3% respectively since 10 November.

Despite the rebound, equities markets’ valuation are still trading at a steep discount & remain close to previous trough levels.

Valuations of offshore Chinese equities (MSCI China Index) versus the emerging market (MSCI Emerging Market Index, MSCI EM) continues to be steeply discounted, reflecting the market’s doubts in China’s new leadership team to implement & prioritise economic development policies, & navigate the US-China tension.

For the valuation discount to narrow substantially, ongoing clarity on economic priorities & implementation will be required.

We believe the two key milestones would be important to watch out for would be the upcoming Central Economic Work Conference (CEWC) in December & the National People’s Congress in March 2023.

The continued emphasis on economic development, high quality growth & the target of GDP per capita reaching “mid-level of advanced economies by 2035” will require a more pro-growth stance in the next few years.

With signs of mobility easing, relief measures to the real estate sector, a moderation of US bond yields, & a potential positive outcome of American depositary receipt (ADR) audit dispute, it would drive a rotation to quality growth stocks.

We prefer selected consumer plays & internet/platform plays that managed to deliver growth & margin expansion despite Covid-19 lockdowns, as they should be well positioned to benefit from the re-opening.

We maintain our preference for investment themes that are aligned with the policy directions would benefit from policy tailwinds, such as “Common Prosperity” (e.g. consumers), decarbonisation (e.g. renewables, NEV and its supply chain), industrial automation & technology upgrades.

However, we remain selective in the technology space amid rising US-China tensions. While defensive names could underperform when the market is positioning for a rebound, we maintain our preference for the telecom sector, which offers both yield & growth.

Source: OCBC

[winston]

Fund Titans Are Buying China Stocks on Bets Worst Is Now Over

by Ruth Carson and John Cheng

Franklin Templeton Investments and Eastspring Investments are joining a growing list of money managers snapping up Chinese stocks.

Source: Bloomberg

https://finance.yahoo.com/news/fund-tit ... 22084.html

[behappyalways]

"買榜衝銷量"雙11退燒？ 淘寶京東搜尋電商不夯了 抖音小紅書內容電商堀起 全民網紅帶貨術 ｜20221126｜@王志郁Plus
https://m.youtube.com/watch?v=qyB0Vtgt05M&t=1s

[winston]

Global funds bought US$8.5 billion worth of A shares in November, as they put real money into the markets, following signs China will loosen its zero-Covid regime.

Source: SCMP

[winston]

China Traders Hunt for Long-Term Reopening Winners After Frenzy

Shifting from frenzied stock bets to longer-term plays such as consumer and health-care shares.

Source: Bloomberg

https://finance.yahoo.com/news/china-tr ... 00735.html

[winston]

China’s market saviour or villain? Global funds attract social media attention in trillion-dollar stock rally as state funds stay out

Foreign funds get mixed reviews as onshore stocks recover from October low without buying support from state-run funds

Goldman says ‘National Team’ has not intervened in stock market since mid-October when the Communist Party held its Congress

by Jiaxing Li

Global funds have purchased 81 billion yuan (US$11 billion) worth of onshore stocks through the Stock Connect link since November.

The CSI 300 Index of onshore stocks jumped 12.5 per cent last month in the biggest revival in two years.

The index climbed 3.3 per cent last week, aided by another US$1 billion of foreign inflows, according to Stock Connect.

Source: SCMP

https://www.scmp.com/business/china-bus ... e=homepage