Wall Street Banks Forecast 7-10% Upside Potential in China Stocks

According to analysts at HSBC, Chinese stocks have significant potential for a 7-10% increase by the end of 2024, attributed to new policy measures and fiscal support from the People’s Bank of China (PBoC).

Recent actions by the PBoC, including the establishment of swap facilities for securities brokers, mutual funds, and insurance companies, aim to enhance market liquidity. HSBC pointed out that these new tools may lead to a market rebound as the year comes to a close.

Additionally, the central bank’s special relending program is designed to enable commercial banks to provide loans for share buybacks, which could further elevate stock prices. HSBC noted that the recent Politburo meeting underscored the importance of promoting growth through countercyclical fiscal and monetary policies.

These strategies focus on stabilizing the housing market, boosting the capital market, and fostering private sector development. HSBC views this as a pivotal shift in policy, indicating stronger government support for the stock market.

While HSBC has reduced its year-end target for the Shenzhen Composite by 7% to 9,800, the targets for the Shanghai Composite and CSI 300 remain unchanged, pointing to a potential upside of 7-10%. Despite the sluggish economic conditions, HSBC maintains a positive outlook on China’s equity market, particularly in light of anticipated rate cuts from the Federal Reserve.

The analysts predict that a cycle of Fed cuts, assuming no U.S. recession occurs, could lead to a rise in Chinese equities by as much as 25%, with growth stocks expected to outperform value stocks.

Moreover, HSBC highlighted ten stocks across five investment themes that are poised to benefit from China’s growth policies and global expansion, including Roborock, Mindray, BYD, and Xiaomi.