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

[winston]

Chinese Investors Shift More Cash Abroad in Blow to Local Stocks

Chinese investors are shifting more money into overseas assets as the Federal Reserve’s interest-rate hikes add allure to dollar deposits and bonds, putting pressure on slumping local stocks.

The trend looks poised to gain more momentum as bond traders bet the Fed will keep interest rates high and Chinese policy makers cut short-term borrowing costs.

More outflows would hurt the local stock market at a time when pessimism is deepening amid worries over economic growth and geopolitics.

Net securities outflows due to Chinese investors’ outbound portfolio investments hit a record $173 billion last year.

Source: Bloomberg News

https://finance.yahoo.com/news/chinese- ... 56196.html

[winston]

Bullish China stock forecasts doubted by money managers who see no risk appetite, Bank of America survey shows

Some 20 per cent of participants are banking on Asia’s largest economy to strengthen over the next 12 months, versus 49 per cent in May and 79 per cent in April

Bank of America’s latest survey is based on responses from166 fund managers who manage about US$329 billion of assets

by Jiaxing Li and Yulu Ao

Source: SCMP

https://www.scmp.com/business/markets/a ... 5c92601911

[winston]

CHINA STRATEGY – HOW TO POSITION AMID LUKEWARM CONSUMPTION RECOVERY?

Investors have been anticipating supportive growth measures to enhance growth momentum.

We expect further targeted easing measures to be announced in the next few weeks, especially after the release of 2Q23 activity data, the State Council meeting & the July Politburo meeting.

We believe the timing & magnitude of targeted easing measures will be critical to restore consumer confidence & investor confidence as expectations has been building up. That said, our base case is that we do not expect a broad-based massive easing like those in previous easing cycles.

Aside from the announcement of expected target easing measures, the USDCNY direction has a high correlation to Chinese equities performance & is therefore worth monitoring in the near-term.

As highlighted in our report “China Strategy: What to expect from targeted easing?” a series of targeted easing measures are likely to be announced at the industry level.

In this note, we will examine the potential beneficiaries of consumption stimulus, such as, the new energy vehicles (NEV) supply chain & appliances industries.

We believe the NEV purchase tax extension would be positive for long-term growth but intense price competition remains as a near-term challenge.

We also assess the implications of consumption trends from the latest 618 shopping festival & the Dragon Boat Festival holiday, as well as sub-categories that can potentially benefit from the upcoming summer season spending.

Sub-categories worth paying attention to would include beer & tourism. In the near-term, without much targeted easing to stimulate consumption & boost consumer confidence, we believe “consumption downgrade” proxy would be in focus as consumers appear to have turned more “value” focused for general consumption.

Source: OCBC

[behappyalways]

China stock delistings set to beat record
https://www.theedgesingapore.com/news/c ... eat-record

[winston]

China’s securities regulator cuts holding costs of mutual-fund investors, giving a boost to nation’s underperforming stock market

Management fees charged by new fund products will cost no more than 1.2 per cent, while the custodian-fee ratio will be capped at 0.2 per cent

Those reductions are estimated to provide about US$2.8 billion in savings for mutual-fund investors, based on calculations made by the Post

by Zhang Shidong

Source: SCMP

https://www.scmp.com/business/china-bus ... st-nations

[winston]

Investors buy Chinese stocks for the first time in almost two months

The move seen in onshore and offshore shares was mainly driven by short covers.

Out of 11 sectors tracked by Goldman Sachs, which tracked the period between Jun 30 and Jul 6, only healthcare, financials, communication services and real estate were net sold.

Source: Reuters

https://www.businesstimes.com.sg/compan ... two-months

[winston]

Chinese stocks get ‘net underweight’ snub as economy misfires, while funds make Indonesia top bet: BofA survey

Fund managers with US$257 billion of assets turn ‘net underweight’ in allocation for the first time this year amid economic wobbles, stimulus lag

Without policy tonic, more investors are bracing for Chinese stocks to undershoot the 11-year low last seen in October 2022

by Jiaxing Li

Source: SCMP

https://www.scmp.com/business/markets/a ... p-bet-bofa

[winston]

Schroders Notes 3 Potential Catalysts for Asian Equities, Cheap Valuations for A/ H Shrs

Schroders noted that it remains neutral to optimistic on the overall growth outlook for Asia in the second half of the year, with China expected to achieve its full-year growth target of around 5% this year.

According to the asset manager, the key challenge for the investment market in China is the lack of confidence.

Much of this has to do with the fact that recovery in the mainland real estate market, is lagging slightly. Real estate investment accounts for a significant portion of the overall wealth investment of mainland households.

When the outlook for the property market is uncertain, mainland households will become more cautious in terms of additional spending and investment.

Related News: StanChart Foresees CN GDP to Grow 5.4% in 2023 with 1% Annual Average CPI Inflation

Schroders is still waiting to see what support measures will be introduced to support the real estate market. In addition, if the economic stimulus policies launched by Chinese authorities are effective in boosting investor confidence, there is room for A-shares and Hong Kong stocks to catch up significantly in the second half of the year.

The market is also concerned about PBOC's monetary policy direction. Schroders believed that there is no risk of rising inflation in China, and that there is room for further easing of monetary policy.

Schroder remains bullish on three potential positive factors for Asian equities in the long term, including positive earnings growth for Asian companies, valuations for both A-shares and Hong Kong stocks remaining cheap, and supportive policies for specific strategic sectors in the mainland, which are expected to take over from the real estate sector as a major driver of Chinese economy.

Related News: CN 2Q GDP Hikes 6.3% YoY, Behind Forecast

Source: AAStocks Financial News

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

[winston]

Law firms told to tone down China risk disclosures for IPOs

CSRC was said to have met with local lawyers on July 20, asking them to refrain from including negative descriptions of China's policies or its business and legal environment in companies' listing prospectuses.

Last week, the US Securities and Exchange Commission said it had directed Chinese companies listed on US stock exchanges to disclose more details about the role of the Chinese government in their operations and the impact of a 2021 law banning the import of goods from China's Uyghur region.

Source: Reuters

https://www.thestandard.com.hk/section- ... s-for-IPOs

[winston]

CN State Media Says Stimulus Measures for Capital Mkts Anticipated to Be Launched Intensively

The market is expecting intensive launches of policy stimulus measures for capital markets from the Chinese government, as the fundamental regime of the capital markets is set to be further optimized, Securities Times cited people with knowledge of the matter.

This should help restore market confidence, enhance the attractiveness of capital markets and boost investor sentiment as well as trading volume.

The sources, therefore, projected a greater possibility for the market to resume an upcycle.

Source: AAStocks Financial News

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