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

[winston]

A Stock Trader’s Guide to China’s National People’s Congress

by Selina Xu

More steps to boost consumption, new business-friendly policies for the private sector, and further support for the property industry, are among measures that may do the trick.

Source: Bloomberg

https://finance.yahoo.com/news/stock-tr ... 00603.html

[winston]

vested in 3188 and 2822

China Strategy – National People’s Congress key takeaways

Policymakers set relatively conservative economic targets with a modest stepping up in fiscal support but no major massive easing, which is inline with expectations.

Having said that, the overall tone has become more supportive, & we believe it should be constructive to equities markets.

Broad industry policies appeared to be a continuation from recent government directions.

Key positives are the supportive policy stance on domestic consumption (especially for services), internet & platform, real estate & digitalised economy-related industries (such as, telecom, automation & software etc).

But negative outlook for banks as they are likely to take up the “national service” responsibility in mitigating financial risks in real estate sector.

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

[winston]

Are China Internet Stocks Set Up To Rally In The Second Quarter?

by KATE STALTER

Key Points

The Chinese government issues a lower-than-expected forecast for 2023 GDP.

Big consumer-facing techs PDD, Baidu and NetEase are among price leaders, although none are in rally mode.

Though Chinese stocks posted strong rallies in recent months, those uptrends are sputtering essentially in tandem with the S&P 500.

Big Chinese techs are still expected to be profitable this year, although some are expected to notch slower growth.

Source: Market Beat

https://www.marketbeat.com/originals/ar ... 4A8F75D6B5

[winston]

China Strategy – National People’s Congress policy implications

The National People’s Congress (NPC) concluded with a press conference by the new Premier Li Qiang early this week.

His remarks appeared to be more pro-business, relatively liberal & pragmatic.

Another key highlight is the approval of the State Council’s institutional reform plan which we believe will signal key policy directions.

Boosting domestic consumption, accelerating technology & innovation, and the development of “Digital China’, and preventing financial risks will be the key focus in the next few years and hence, key investment themes.

The onshore A-shares market has proven to be more resilient than Hong Kong (HK) & offshore Chinese equities amid the elevated volatility across different asset classes.

As the results season is only half-way through & several major central banks’ meetings will occur in the next two weeks, we expect HK & Chinese equities market will likely to consolidate in the near-term till the end of March.

Key events to watch out for include the Federal Open Market Committee (FOMC) meeting (21-22 March); results announcement by Pinduoduo (PDD US, Fair value USD90) (20 March) & Tencent (700 HK, Fair value HKD480) (22 March).

Source: OCBC

[winston]

CHINA STRATEGY – FURTHER SIGNS OF PRO-BUSINESS POLICY STANCE

The relative outperformance of A-shares had played out well in the first three weeks in March amid the elevated volatility across different asset classes.

With further signs of pro-growth policy support, especially in the internet & platform industry, the offshore Chinese equities and HK equities have caught up with the outperformance as they have a sizeable index weight being dominated by the internet and platform industry.

We believe Chinese equities are likely to regain momentum thanks to:-
i) on track macro recovery & earnings growth pickup;
ii) supportive domestic credit policy; &
iii) more signs of pro-business policy stance especially with recent evidence for the normalisation of the internet & platform industry.

We believe selected key internet and platform companies would be well positioned to benefit from these trends.

Riding on policy priorities, we believe key investment themes would be
i) boosting domestic consumption,
ii) accelerating technology and innovation,
iii) pushing for the “Digital China” development, &
iv) preventing financial risks.

Source: OCBC

[winston]

CHINA STRATEGY – DIVERGENCE BETWEEN MARKET PERFORMANCE AND FUNDAMENTALS

HK & Chinese equities market performance has been weighed by rising concerns on US-China geopolitical tensions. On the back of this, the MSCI China Index has given back the gains since mid-April, driving a divergence between market performance & solid fundamentals & value has been outperforming growth.

While defensive dividend plays offer relatively low volatility & tend to outperform amid weak sentiment, we believe risk reward skewed towards the upside in light of an undemand valuation & lowered expectations vs solid macro & anecdotal data on consumption spending recovery.

The April Politburo meeting maintained a pro-growth stance & prioritised industrial policies. It is worth highlighting that the meeting detailed on actions to support the private sector & reiterated “housing is for living, not for speculating”.

In this note, we look into some of the developments in internet & platform industry, which we view the online gaming segment as the bright spot. We also update the dividend plays & key consumption industries post 1Q23 results.

We maintain our preference to key investment themes:-
i) boosting domestic consumption
ii) accelerating technology and innovation
iii) pushing for the “Digital China” development &
iv) preventing financial risks.

In light of the weak sentiment, the dividend plays would also offer relatively low volatility & decent yield.

Source: OCBC

[behappyalways]

China’s AI frenzy spurs 200% rally for obscure book publisher
https://www.theedgesingapore.com/digita ... -publisher

[behappyalways]

Overseas investors bought net 8.5 bn yuan of #Chinese #A-shares via Mainland - HK Stock Connect on Fri, the biggest one-day net buying in nearly four months.

https://twitter.com/YuanTalks/status/16 ... 8652434432

[winston]

China Strategy: What to expect from targeted easing?

While we expect targeted easing to step up after the release of 2Q data around July, recent headlines & news flows has highlighted some areas of focus.

For instance, lowering of deposit interest rate at the macro level, & ongoing speculation around more real estate support measures & possible stimulus measures for new energy vehicles (NEV) & home appliances at the industry level.

In terms of geopolitical tension, it was reported in the media that US Secretary of State Antony Blinken plans to visit China in the coming weeks.

A potential resumption of Blinken’s visit to China would be the highest-level US government official visiting China since the Covid-19 pandemic & would be one of the key signposts to watch out for as a sign of stabilisation of US-China geopolitical tensions & could help ease investors’ concern.

Secondly, interaction & engagement with international leading business leaders has picked up significantly.

As the market awaits more details on targeted stimulus, investor confidence may stay muted in the near-term. These would support a near-term focus on stocks with stable & rising dividends.

An update of the quality dividend stock screen is illustrated in Exhibit 1 & 2. We reiterate our relative preference to the onshore A-share markets given it is less sensitive to the recent USDCNY weakness & US-China geopolitical tensions, and is more sensitive to government policy roll out.

Also, we believe it is worth monitoring & accumulating select internet & platform companies. Sentiment may stay muted until signs of growth sustainability & a stabilisation of geopolitical tensions emerge.

The internet & platform industry names are trading at undemanding valuation & the industry's 1Q23 results beat expectations largely due to disciplined cost optimisation.

Source: OCBC

[winston]

China’s Stimulus Runs Into Wall of Doubts in a Bearish Market

by Sofia Horta e Costa

Tuesday’s interest rate cut from the People’s Bank of China drew little enthusiasm from equity traders, with volumes about 25% lower than recent averages.

Even news that China is considering a broad package of stimulus measures only boosted the CSI 300 Index by half a percentage point.

It’s been languishing in a bear market for close to one and a half years.

China needs to create a situation where producer prices recover, the equity market takes off and people stop panicking over LGFV (local government financing vehicles) credit risks.

Consumers now see few signs record youth unemployment and the longest-ever downturn in the housing market will end any time soon.

Source: Bloomberg

https://finance.yahoo.com/news/china-st ... 27438.html