Bocom outguns Wall Street forecasters on Chinese stocks with ‘playing offense’ call for 35 per cent upside next year

Name: Trace, test, lock down, repeat: Three years under China’s zero-Covid strategy
Uploaded: 2022-12-19T00:12:35.000Z
Duration: 11 min 33 s
Description: Trace, test, lock down, repeat: Three years under China’s zero-Covid strategy

Bocom is not alone in its bullish tilt on Chinese stocks in 2023, as fund manager Harvest Global also sees gain in excess of 30 per cent

JPMorgan Private Bank says while market recovery is more assured, short-term positive news may have already been priced in

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People walk past the Bank of Communications outlet in Ccentra, Hong Kong. Photo: Reuters

Jiaxing Li

Published: 8:12am, 19 Dec 2022Updated: 2:48pm, 19 Dec 2022

Chinese stocks are set to deliver the biggest payback for investors in six years, and “playing offense” is the way to go to capture the impending market rally, according to the Bank of Communications.

The MSCI China Index, which tracks 797 companies listed at home and abroad, will climb by 26.8 per cent to 34.9 per cent in 2023 as economic growth accelerates after a wider reopening of the economy, the bank predicts. A 13 to 17 per cent expansion in corporate earnings will support higher market valuations, it added.

“2023 will be a year of reversal and recovery for the Chinese market,” said Carl Cai, a macro strategist based in Hong Kong at Bocom, as the nation’s fifth biggest banking group is known. Stronger fundamentals and liquidity conditions will make Chinese equities “the top choice” for allocation next year, he added.

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Trace, test, lock down, repeat: Three years under China’s zero-Covid strategy

Bocom’s 2023 picks include on-demand delivery platform operator Meituan, liquor distiller and distributor China Resources Beer, biotech firm WuXi Biologics and electric-car maker BYD.

If Bocom is right, the index will end the year with the best performance since a 54 per cent surge in 2017, according to data published by the New York-based index compiler. The bank is not alone. Beijing-based Harvest Global Investment sees the index rising as much as 33 per cent in 2023 as policy stimulus kicks in.

They are more bullish than Wall Street forecasters, with both Goldman Sachs and Morgan Stanley seeing the index rising 9 per cent in 2023 from current levels. Bank of America said there’s room for market valuation, now at about 10 times future earnings, to expand.

China’s economic reopening, backed by measures to roll back zero-Covid regimens and efforts to shore up financing for cash-strapped homebuilders, have fuelled optimism that the two-year rout in Chinese stocks has run its course.