China - Market Strategy 05 (Jan 23 - Jun 24)

[behappyalways]

#China's state investor Central Huijin estimated to have spent 330 bn yuan increasing #ETF holdings in Q1 to support stock market
https://twitter.com/YuanTalks/status/17 ... 2848607726

[winston]

Global investors snap up Chinese stocks for third month in a row, in more upbeat tone for US$9 trillion market

Valuations in China’s markets are ‘worthy of allocations’, Everbright Securities analyst says

Overseas buying is expected to carry on at least in the near future: Goldman Sachs

by Zhang Shidong

Source: SCMP

https://www.scmp.com/business/china-bus ... pe=section

[winston]

‘The worst seems over’ for ‘cheap’ and ‘reasonably attractive’ Chinese stocks: EFG Asset Management

‘The worst is over for China, and a lot of negative news has already been priced in’, EFG Asset Management’s deputy CIO says

CSRC measures announced in April have changed market sentiment from very negative to positive, he says

by Enoch Yiu

Source: SCMP

https://www.scmp.com/business/china-bus ... pe=section

[winston]

China Strategy: Labour Day holiday highlights cautious consumer stance

Consumption data during the Labour Day holiday (1-5 May) highlighted that consumer sentiment remains subdued with robust traffic volume offset by a lower per capita spending, suggesting that consumption downgrade trend continues.

Despite that the number of tourists was 28% higher than the 2019 level, spending per tourist was 11% lower as more visitors travelled to smaller and lower-tier cities.

Duty-free sales trend in Hainan Island during the Labour Day holiday remained soft with Hainan offshore duty free sales down 38% YoY to CNY547m sales during the holiday period.

The latest People’s Bank of China’s (PBoC) 1Q24 Urban Depositor Survey published at the end of April also suggests consumer sentiment appears to be stabilising but the pace of recovery is subdued.

While 23% of respondents indicated a higher consumption propensity in 1Q24, which was at the same level in 4Q23, but this was well below the pre-pandemic level.

Hence, policy implementation post the April Politburo meeting would be a key catalyst to watch in the coming months, especially with regards to accelerating government bond issuance and housing inventory destocking.

We view the “trade-in programs” as being the more relevant in boosting consumption in the near-term. In addition, earnings growth estimates revision momentum would be another key indicator to watch from a corporate fundamental perspective.

From a fund flow perspective, global long-only mutual funds are still underweighting China in April despite narrowing the underweight position.

Southbound net inflows picked up in April and reached CNY74b vs an average of CNY41b in 1Q24 (Exhibit 4).

Post the recent bounce, Hong Kong (HK) and Chinese equities are trading around the lower-end of the range with Hang Seng Index at 8.5x forward price-to-earnings (PE) and MSCI China Index at 9.4x forward PE.

While the valuation discount of MSCI China Index vs MSCI Emerging Market Index has narrowed marginally to 16%, it is still at the high-end when compared to the average of 5% discount over the past five years.

In the meantime, we highlight opportunities in our investment themes:
i) the proliferation of generative artificial intelligence (AI),
ii) identifying quality growth and market leaders amid a bumpy recovery, and
iii) quality plays with decent yield to cushion market volatility.

Source: OCBC

[winston]

China to nurture stock rally by masking live foreign flows data

The Shanghai and Shenzhen exchanges plan to cease displaying real-time figures on purchases or sales of local stocks through trading links with Hong Kong

The two bourses will provide the turnover details on a daily basis, along with the 10 most-traded stocks via the northbound channel

Source: Bloomberg

https://www.scmp.com/business/banking-f ... 07d6&tc=14

[winston]

Why rally in Chinese stocks is hardier than doubters think

Many investors believe the current rally in Chinese stocks is built on shaky foundations, but there are reasons to think this surge could last

Data beating expectations indicates a stabilising economy, markets seem convinced by Beijing’s policy moves and the rally is not disconnected from domestic fundamentals

by Nicholas Spiro

First, the economy is stabilising,

Second, fears that Beijing is complacent about growth have faded.

Third, concerns that the rally is being driven by technical and external factors as opposed to domestic fundamentals are overdone.

Source: SCMP

https://www.scmp.com/opinion/china-opin ... 2907&tc=31

[winston]

China’s mutual funds top record of US$4.1 trillion as investors shift out of deposits amid bond rally, stock rebound

Combined net assets increased 5.4 per cent month on month in April to more than 30 trillion yuan (US$4.1 trillion), industry association says

Shift reflects demand for risk assets as investors look to put an abundant pool of cash to work at a time when the property market is a poor option

by Zhang Shidong

Source: SCMP

https://www.scmp.com/business/china-bus ... pe=section

[winston]

China’s ‘broker butcher’ makes bold moves to breathe life into moribund stocks. Will the US$9 trillion market respond?

New CSRC head Wu Qing’s elixir for reviving markets is a cocktail of state intervention, strict law enforcement and a tougher line on fraudulent listings and manipulation

Deloitte expects the moves to improve long-term market health by setting a higher benchmark for listed firms and increasing stock market benefits to the economy

by Zhang Shidong

Source: SCMP

https://www.scmp.com/business/china-bus ... pe=section

[winston]

Largest ETF Outflows in Over a Year a Warning For China’s Stock Rally

Equity ETFs in Shanghai and Shenzhen saw a combined withdrawal of $4.2 billion in the month through Monday. That’s more than what investors had poured into the funds in the prior two months.

Source: Bloomberg

https://finance.yahoo.com/news/largest- ... 00858.html

[winston]

<Research>G Sachs Remains Constructive on Asian Equities, Lifts CSI 300 Target to 4,100

Goldman Sachs noted in a report that it maintained a constructive view on Asian equities, with Chinese equities having rallied 32% from their January lows, making them one of the best-performing markets in the region, and it believed that such growth could be sustained.

The broker raised its 12-month target for the MSCI China Index from 60 to 70, and its target for the CSI 300 Index from 3,900 to 4,100, representing potential gains of 12% and 14% respectively from current levels.

According to Goldman, the uptrend in the mainland stock market is mainly driven by two policy developments.

First, the support for buying existing property stock for public sector use bolstered the property market on the supply side. Together with measures to boost demand, it could help stabilise residential sales, property prices and completion progress if implemented on a large scale.

Second, the new "Nine Mesaures", which strengthens the regulation of the capital market, will enhance the quality of listed companies and investor protection.

Related News: IMF Raises CN Economic Growth Forecast for This Yr to 5%

The broker expected that policy implementation and corporate earnings growth would support a rise in the mainland stock market, with the main focus being the 3rd Plenary Session of the CCP Central Committee in July.

At the same time, Goldman believed that Asia's macro-economies remain dynamic, with China, Hong Kong, Taiwan and Malaysia, rising relatively faster, reflecting greater sensitivity to the macro-environment.

Market performance was driven by the Mainland's positive property measures and the AI theme. Indonesia, the Philippines and South Korea performed less favourably.

Looking to 2H, the broker believed that economic growth would continue, with the technology equipment sector, Taiwan and South Korea benefiting from US growth.

Chinese economic growth would meanwhile be favourable to both the Mainland and Hong Kong stock markets, as well as to the internet and automotive sectors.

The Indian market is resilient in the face of high interest rates and a strong USD.

Finally, growth in the region, high interest rates and strong USD are all favourable for the energy sector.

Source: AAStocks Financial News

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