China’s A-share big caps will continue to outperform in 2018, say Credit Suisse analysts
The full circulation of H shares – if it comes into effect – will boost mainland companies’ financing ability and Hong Kong’s attraction as IPO destination
Stocks in industry leaders on the mainland A-share market have surged by 57 per cent in the first 11 months this year, and this rally is likely to continue in 2018 as market consolidation goes on, said analysts at Credit Suisse.
“We have picked the biggest caps in each of the 28 industries categorised by data provider Wind for a study, and found that they rose by about 57 per cent on average year to day, largely outperforming the benchmark,” said Chen Li, Credit Suisse’s China strategist, in a forum in Shenzhen on Thursday.
“The rally is likely to continue into 2018, although I would prefer leaders in the segment markets rather than the big first-tier names in big industries,” he said, adding that as China continues to push for supply-side reform, which favours bigger industry players while forcing smaller ones out, the big caps will continue to enjoy a rising market share and better business returns.
The benchmark Shanghai Composite Index has this year gained around 8.6 per cent – by Friday’s close it was at 3371.7 – while industry leaders have been rising at a faster pace.
Kweichow Moutai, China’s biggest distiller, saw its share price rocket up to 639.2 yuan (US$96.4), up by 91 per cent from 334 yuan in 2016, becoming the most eye-catching blue chip in Shanghai this year.
Mutual funds’ weighting of ChiNext, the Shenzhen-based listing of smaller tech companies, has continued the fall since the beginning of this year due to low market risk appetite, tight market liquidity and ChiNext’s earnings growth slowing down, Gao Ting, the head of China Strategy at UBS wrote in a note on Thursday.