Citigroup sees another 20 per cent upside in Chinese stocks this year on spending stimulus

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Uploaded: 2022-07-18T08:14:14.000Z
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Hang Seng Index can deliver another 20 per cent gain this year as policymakers in Beijing step up spending on infrastructure projects

Citigroup also sees potential for about 10 per cent gain in the CSI 300 Index of onshore stocks, Hong Kong-based strategist Liu says

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Chinese stocks traded at home and those listed in Hong Kong could increase by 10 to 20 per cent from here on stimulus push, Citigroup says. Photo: Shutterstock

Cheryl Heng

Published: 4:14pm, 18 Jul 2022Updated: 4:28pm, 18 Jul 2022

Chinese equities could still deliver as much as 20 per cent upside by year end as policymakers in Beijing step up stimulus spending to revive growth momentum after the economy stumbled last quarter, according to Citigroup.

Infrastructure investments rose by 7.1 per cent in the first six months this year, according to government data, against the US bank’s forecast for a 7.7 per cent annual gain. That will augment measures by the central bank and other authorities to inject more liquidity, lower borrowing costs and ease a credit crunch among property developers.

“As the Chinese economy picks up, that would create more momentum for investors to price in all those positive factors,” Liu Ka-ho, head of investment strategy at its banking unit in Hong Kong, said in a July 11 interview. “We are seeing pro-growth policies, very importantly in the infrastructure investment push.”

Liu Ka-ho, head of investment strategy and portfolio advisory at Citibank (Hong Kong). Photo: Handout

The Hang Seng Index could climb to 24,300 points by the end of the year, or about 20 per cent from the closing level on Friday. Liu also forecast the CSI 300 Index of mainland China’s biggest stocks to advance by 9.5 per cent.

Chinese stocks are turning into a one-way bet for global strategists and money managers as returns on local financial assets “uncorrelated” to global trends. China is easing policy while the Federal Reserve and central bankers in developed markets pursued the most aggressive rate increases in many decades.

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Victims of one of China’s worst financial scandals attacked by unidentified men in white at protest

Bets on more stimulus grew after China’s economy expanded by 0.4 per cent last quarter amid Covid-19 fallouts, the slowest since the onset of Covid-19 pandemic in early 2020. Investors are also looking for Beijing to tone down its crackdown on tech companies, tweak its zero-Covid strategy and temper the housing crisis.