InvestIdeas

China stock investors eye better 2023 after US$3.9 trillion rout

Combined losses from stocks traded on the mainland and in Hong Kong reached US$3.9 trillion.

2023 is shaping up to be a better year, now that authorities have put economic revival back as a top priority, ramped up efforts to salvage an ailing property sector and signalled more support for private enterprise.

It won’t be a smooth ride though, given the challenges from a messy Covid-Zero exit to lingering US-China tensions and a looming global recession.

For Covid, it is a short-term pain in one to two months and long-term gain for consumption and industrial activity” in six to nine months.

Chinese firms’ cheap valuations also stand out. At about 10.6 times its 12-month forward earnings estimates.

Source: Bloomberg

https://www.businesstimes.com.sg/intern ... llion-rout

CICC's 10 Forecasts for 2023; H Shrs Expected to Realize Double-digit Rev. This Yr

CICC issued a report, laying out ten forecasts for 2023:

1) China is hopefully to realize advanced recovery among world's economies this year in wake of escalating recession pressure on the US;

2) Both A-shares and H-shares are expected to achieve significant positive returns this year, with H-shares outshining A-shares;

3) China's inflation may face staged pressure under post-epidemic demand revival;

4) China should end the monetary easing, which will lead to rising median interest rate and stronger major asset stocks than bonds;

5) Real estate sales area will rebound and swing to positive growth, and housing prices are partially under upside pressure;

6) China's exports may still be subdued under the US setback and active destocking cycle;

7) Pan-consumer industry may be a key area of excess returns this year with gradually fading epidemic impact;

8) Internet and pharmaceutical industries are projected to hail a reversal this year;

9) Funding of A-shares and H-shares will ameliorate as a whole on the back of overseas fund comeback; and

10) Inflection point of the USD trend may not arrive until 2H23, and the RMB may rocket amid volatility.

CICC attributed the bleak performance of China market, especially H shares, last year to waning domestic fundamentals, policy austerity of the US Fed and geopolitical factors.

However, it forecast both A-shares and H-shares to realize revenues in around double-digits this year, in light of marginal improvement in some factors and current valuations which still have mid-to-long-term attractiveness.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... t-news/HK6

China's government to take golden shares in Alibaba, Tencent
https://www.theedgesingapore.com/news/c ... ba-tencent

CHINA STRATEGY – STAY CONSTRUCTIVE

Hong Kong (HK) & Chinese equities market have pulled back since February with Hang Seng Index (HSI), MSCI China & CSI300 Index having corrected 2.6% / 2.4% / 1.9% respectively after rallying 7.6% / 9.6% / 5.3% year-to-date (YTD).

The pull back is driven by a combination of factors, such as, the approaching results season & concerns regarding US-China tensions resurfacing.

We believe the market is likely to move sideways until March where there is a policy vacuum period before the National People’s Congress (NPC) & the results season, we stay constructive for Chinese equities & expect the onshore A-share to play a catch up and outperform in the near-term.

We believe earnings recovery would remain as a key driver for potential index upside this year. Earnings growth is expected to rebound to around 12-14% for both onshore & offshore Chinese equities.

While valuation of offshore Chinese equities has recovered, it is still trading at a discount to emerging market.

Over the past month, policies supportive of economic growth have continued to be announced, & we expect the upcoming NPC will unveil & confirm the policy priorities and agenda for the coming five years.

We continue to prefer internet & platform plays as they could be regarded as Chinese consumption proxies, benefitting from the consumption recovery in the coming quarters.

We expect rotation within internet & platform companies to continue until the quarterly results season where investors would cross check valuations with results & guidance.

maintain our preference on the cyclical recovery reopening theme, which primarily focuses on consumption related industries, & the structural policy tailwind beneficiaries’ theme, which the upcoming NPC would elucidate as the new leadership & economic teams will reveal plans to reset the economy for the next five years.

Source: OCBC

China reopening play ‘overhyped’ as stock market losses inflict pain, spy balloon rekindles US tech sanctions

Chinese stocks turned to top losers this month from world beaters in January amid mixed economic data, fund outflows and fresh geopolitical risks

Bulls still appear to outnumber bears among China market analysts at Wall Street firms with economy to fire on more cylinders going forward

by Jiaxing Li

Global fund managers plouged a record US$21 billion into yuan-denominated stocks in January, their net buying has slowed to US$5.4 billion over the past two weeks.

Mainland Chinese investors took US$2.1 billion off Hong Kong-listed stocks at the same time.

The Hang Seng Index slipped 6.6 per cent over the past two weeks, while the CSI 300 Index of onshore stocks declined 1.8 per cent and the Hang Seng China Enterprises Index tumbled 8.3 per cent. The MSCI China Index slipped 7.8 per cent over the same two-week period.

Chinese banks extended a record 4.9 trillion yuan (US$720.7 billion) in new loans in January. Yet, loans to households remained sluggish, suggesting weak sentiment amid job insecurity and property market headwinds.

Source: SCMP

https://www.scmp.com/business/china-bus ... es-us-tech

Billionaire banker Bao Fan reported missing in China - BBC News
https://m.youtube.com/watch?v=fzWNVXirKEU

Chinese stocks mark best day in nearly three months on recovery hopes

Chinese stocks saw their best day since end-November on Monday (Feb 20), as risk appetite improved on hopes of the economy gradually shifting from the reopening to a recovery, outweighing the pressure from US-China tensions.

China's blue-chip CSI 300 Index closed up 2.5% and the Shanghai Composite Index gained 2.0%. Both indices logged their biggest daily jump since Nov 29.

"High-frequency data shows traffic congestion and subway crowds in big cities have rebounded to a near-normal level. In Tier-1 cities, secondary property transactions have been returning strongly".

"High-frequency data shows traffic congestion and subway crowds in big cities have rebounded to a near-normal level. In Tier-1 cities, secondary property transactions have been returning strongly,"

Source: Reuters

https://www.theedgemarkets.com/node/655957

Hedge funds cut China stock bets from near peak level as strategist says ‘bide your time’ for recovery upside

Hedge funds trimmed their bets on Chinese stocks as a percentage of net exposure over the past two weeks, explaining pressure on prices

Odds of eventual recovery look good and investors should be patient to extract future upside

by Jiaxing Li

Chinese equities rose to 13.1 per cent of the net exposure of global hedge funds on January 27.

Foreign fund managers have purchased US$2.3 billion worth of onshore stocks so far this month, a steep drop-off from the record US$21 billion buying spree in January.

Source: SCMP

https://www.scmp.com/business/investor- ... ery-upside

CHINA STRATEGY – NATIONAL PEOPLE’S CONGRESS PREVIEW

The NPC will commence on 5 March, with key economic targets and policy priorities to be unveiled in the Government Work Report (GWR).

More importantly, the new economic team (which is expected to be led by Mr Li Qiang) will be confirmed, and will offer a glimpse of the new team’s plan in resetting the economy in the next five years.

It is expected that GDP growth target will be set at “more than 5%” for this year, which is more or less in line with the GDP growth targets of key provinces and municipal cities, such as Guangdong, Jiangsu, Zhejiang, Shanghai and Chongqing etc.

Other key economic targets such as the CPI, budget deficit, local government special purpose bond quota, new jobs creation and unemployment, will also be announced at the NPC.

We maintain our relative preference for the onshore A-share market given the industry and sector mix will make it better positioned to benefit from government growth supportive policies.

We prefer the CSI 500 Index to the CSI 300 Index given the former has a lower exposure to banks and financials.

Source: OCBC

UBS Sees $87 Billion of China Retail Money Supporting Stocks

by John Cheng

China’s households may plow as much as 600 billion yuan ($86.8 billion) of excess savings into the nation’s stock market, driving the next leg of the rally,

The potential upside is “significant” given what happened in 2014-2015, when 2 trillion yuan of retail inflows helped stage a trough-to-peak surge of about 150% in onshore Chinese shares.

Chinese households have around 8 trillion to 10 trillion yuan in excess available deposits due to limited spending during the pandemic, and the precedent in other countries suggests about 6% end up in equities investment.

“With the A-share market showing some positive momentum in recent quarters, the conditions are ripe for retail inflows to pick-up in the next 3-6 months” .

Retail flows typically prefer cyclicals including software, financials and tech shares over food and beverage.

China has more than 200 million mom-and-pop investors, who are known for driving extreme market volatility, which had led to the epic crash in 2015.

Source: Bloomberg

https://finance.yahoo.com/news/ubs-sees ... 18014.html