China Stocks Poised for 7-10% Upside by 2024, Says HSBC Analysts
HSBC analysts have projected a potential 7-10% upside for China stocks by the end of 2024, driven by new policy tools and fiscal support from the People's Bank of China (PBoC). The recent measures taken by the PBoC, such as setting up swap facilities for securities brokers, mutual funds, and insurance companies, are aimed at boosting liquidity in the market.
"These new policy tools could pave the way for a market rebound towards the end of the year," according to HSBC. Additionally, the central bank's special relending program could enable commercial banks to provide loans for share buybacks, potentially lifting stock prices further.
HSBC analysts have highlighted that China's recent Politburo meeting emphasized the importance of supporting growth through countercyclical fiscal and monetary policies. These policies are intended to stabilize the housing market, boost the capital market, and promote private sector growth, signaling stronger government support for the stock market.
While HSBC has revised its end-2024 target for the Shenzhen Composite (SZCOMP) to 9,800, the targets for the Shanghai Composite (SHCOMP) and CSI 300 remain unchanged, suggesting a potential upside of 7-10%. Despite the current economic challenges, HSBC remains optimistic about China's equity market, particularly with the anticipated Federal Reserve rate cuts.
The analysts anticipate that a Fed cut cycle, barring 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 (SZ:), and Xiaomi (OTC:), as well-positioned to benefit from China's growth policies and global expansion.
In summary, HSBC's analysis suggests that China stocks have the potential for significant growth over the next few years, supported by favorable policy measures and global economic conditions. Investors may consider positioning themselves in Chinese equities to capitalize on this potential upside.