China’s Politburo meeting critical for traders as they eye new bets after reopening, AI trades fade
- Traders will be looking for policy clues from the Politburo meeting this week as the Communist Party’s top decision-making body reviews first-quarter performance
- The CSI 300 Index has risen for one month after the Politburo meeting in three of the past five years, posting the best gains in 2021
Investors will turn their gaze on the Communist Party’s high-level meeting for clues as to how to recalibrate their portfolios, as the China reopening trade unravels and the artificial intelligence (AI) frenzy shows signs of cooling.
China’s faster-than-estimated 4.5 per cent growth in the first quarter means that extra stimulus is unlikely and policymakers will focus more on measures to stabilise employment, boost consumption and revitalise the private sector, according to Citic Securities, the nation’s biggest publicly traded brokerage. Sinolink Securities says that the tech and high-end manufacturing industries will probably receive more policy support from the meeting after a slew of visits to factories recently by Xi and Premier Li Qiang.
“We will be more attentive to the policy changes in the second quarter and the Politburo meeting will be key to verifying these assumptions,” said Fu Jingtao, a strategist at Shenwan Hongyuan Group in Shanghai. “Revival of household confidence is still the top priority, so the recovery of the property market and consumption will be important in the second quarter.”
It is also worth watching how the leaders plan to stabilise the jobs market, he added.
The sub-gauges of consumer staples and discretionary stocks have dropped at least 2.5 per cent so far this year, lagging a 2.4 per cent gain in the CSI 300 Index. The private sector is another worry for investors, with investments rising by 0.6 per cent in the first quarter.
To make matters worse, China’s central bank seems to be rolling back loose monetary policies, injecting only 20 billion yuan (US$2.9 billion) into the financial system so far this month, the least since November. Further denting sentiment is the headline news that the Biden administration will soon endorse a new round of investment curbs in China, ranging from AI to quantum computing.
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“The focus of the Politburo meeting will be on policy implementation rather than strong stimulus,” said Zhao Wei, an analyst at Sinolink Securities. “Expanding domestic demand and stabilising the job market will be the key tasks.”
The Politburo meetings have moved stocks in recent years. For instance, green-energy bets from photovoltaic stocks to electric-vehicle makers stood out in 2021, defying a broader market decline after China’s top leaders stressed the importance of carbon neutrality at the conference.
The CSI 300 Index has risen for one month after the April Politburo meeting in three of the past five years. The best performance was in 2021, when the gauge rose almost 4 per cent, while the worst was in 2019, when the measure slumped 11 per cent as the policy tone shifted to financial deleveraging.
“[As the meeting comes] towards the end of the first observing period for the economic recovery, more policies will be on the way to further [help] the recovery [take hold],” said Qiu Xiang, an analyst at Citic Securities.
