China Stocks Poised for 7-10% Upside by End of 2024, HSBC Analysts Say
In a recent report, HSBC analysts have highlighted the potential for China stocks to see a 7-10% increase by the end of 2024. This positive outlook is driven by new policy tools and fiscal support from the People's Bank of China (PBoC).
The PBoC has implemented measures such as setting up swap facilities for securities brokers, mutual funds, and insurance companies to boost liquidity in the market. These new policy tools are expected to support a market rebound towards the end of the year.
Furthermore, the central bank's special relending program allows commercial banks to provide loans for share buybacks, which could contribute to lifting stock prices. The recent Politburo meeting in China emphasized the importance of supporting growth through countercyclical fiscal and monetary policies.
HSBC sees this as a "decisive turn in policy direction," indicating stronger government support for the stock market. While the end-2024 target for the Shenzhen Composite has been trimmed by 7% to 9,800, the targets for the Shanghai Composite and CSI 300 remain unchanged, suggesting a potential upside of 7-10%.
Despite the current sluggish economy, HSBC maintains an optimistic view on China's equity market, especially with the expected Federal Reserve rate cuts. The analysts project that a Fed cut cycle, in the absence of a US recession, could lead to a 25% increase in China equities, with growth stocks outperforming value stocks.
HSBC has also identified ten stocks across five investment themes, including Roborock, Mindray, BYD, and Xiaomi, that are well-positioned to benefit from China's growth policies and global expansion.
In conclusion, the outlook for China stocks remains positive with the potential for a significant upside by the end of 2024. Investors should consider the impact of new policy tools and fiscal support from the PBoC, as well as the anticipated Federal Reserve rate cuts, when making investment decisions. By staying informed and strategic, individuals can capitalize on the opportunities presented by China's evolving market dynamics.
