Investment banks bullish on Chinese stocks due to reforms and potential valuation growth

From South China Morning Post: 2024-05-05 19:30:14

Goldman Sachs predicts a more favorable trading environment for A shares in China following new guidelines aimed at improving transparency and risk management. Analysts suggest potential 40% growth in valuations if reforms align with global leaders in factors like dividend payouts and corporate governance.

UBS upgrades MSCI China Index and Hong Kong stocks to overweight citing earnings resilience and policy support, reversing a previous downgrade. BNP Paribas also adopts a bullish stance on the MSCI China index, anticipating a 4% increase. Hang Seng Index surges 4.7% last week, entering bull-market territory.

Domestic demand is being closely monitored as investors gauge the potential upturn in the Chinese economy. Challenges remain, particularly in the property sector comprising over 25% of GDP, with concerns about deflationary pressures and muted demand. Policymakers vow to stimulate growth, especially addressing property sector struggles.

Cheap and under-owned Chinese equities are seen as a viable hedge for global investors, with growing interest in Chinese stocks and stabilizing outflows from US investors noted. Valuation gap between Hong Kong and US stocks widens, signaling potential for future adjustments and narrowing performance discrepancies.



Read more at South China Morning Post: Goldman Sachs, UBS, BNP more positive on Chinese stocks as chorus of favourable sentiment grows in run-up to July plenum