Global Investment Banks and Asset Managers Optimistic About a Rebound in China’s A-Share Market
Global investment banks and asset managers are expressing cautious optimism regarding a potential rebound in China’s A-share market this year. The market underperformed major global peers in 2023, but analysts believe that attractive valuations, improving corporate earnings, and the potential for a recovery in investor sentiment could all contribute to a rally in the market.
Goldman Sachs Projects 19% Price Return for CSI 300 Index in 2024
Goldman Sachs is projecting a 19% price return for the CSI 300 Index in 2024. The investment bank remains overweight on A shares and positive on sectors like retail, media, entertainment, and tech hardware. This optimism is based on the expectation that Chinese listed companies will see profit growth of 8 to 10 percent this year, which is considered a critical factor in reaching a bottom for valuations. The recent market corrections have led to a decline in the price-to-earnings ratio of the CSI 300 Index, making it the lowest since the end of 2018.
Cautious Optimism as Valuations and Corporate Earnings Improve in A-Share Market
Analysts are cautiously optimistic about the A-share market as valuations and corporate earnings show signs of improvement. The A-share market may have been mispriced due to investor pessimism, says Meng Lei, China equity strategist at UBS Securities. Corporate earnings have bottomed out and started to pick up since the third quarter of 2023. This trend is expected to continue this year as nominal GDP growth speeds up, inflation recovers, and potential policy support measures are implemented.
Pictet Wealth Management Remains Positive on Chinese Equities for Short to Medium Term
Pictet Wealth Management maintains a positive stance on Chinese equities for the short to medium term. Despite a bumpy economic recovery, the firm believes that China’s economic recovery will lead to an improvement in corporate earnings and investor sentiment in 2024. China is expected to announce its 2023 GDP growth, which is anticipated to be slightly above 5% in real terms. For 2024, Pictet Wealth Management forecasts real GDP growth of 4.7% with the help of stimulus measures.
Challenges and Opportunities Await Chinese Equities in 2024
While there is optimism about the A-share market, there are also challenges that lie ahead. Foreign capital has seen a net outflow of 7.96 billion yuan from A shares since the beginning of the year, indicating that investors are adopting a wait-and-see approach amid lingering uncertainties. Additionally, factors such as global election activities, uncertainties surrounding China’s exports, and the high savings propensity among Chinese households could limit market performance. However, policy support and signs of improving China-US relations could provide a cushion for the market. Desmond Kuang, chief investment officer for China at HSBC Global Private Banking and Wealth, predicts that 2024 will be a year abundant with both opportunities and challenges for Chinese equities.
Analyst comment
Positive news:
– Global investment banks and asset managers are optimistic about a rebound in China’s A-share market.
– Goldman Sachs projects a 19% price return for the CSI 300 Index in 2024.
– Valuations and corporate earnings in the A-share market are improving.
– Pictet Wealth Management remains positive on Chinese equities for the short to medium term.
Negative news:
– There have been net outflows of foreign capital from A shares.
– Challenges such as global election activities, uncertainties in China’s exports, and high savings propensity among Chinese households could limit market performance.
Conclusion:
Overall, the news is mostly positive, with optimism about a rebound in the A-share market and projections of price returns. However, there are challenges and uncertainties that could impact market performance. The market is expected to have both opportunities and challenges in 2024.
