May 17, 2017
China’s stock market has posted better gains than a broader index of emerging markets in the past 10 months, but that isn’t a reason to sell Chinese stocks, according to analysts at Credit Suisse. The Swiss bank has a list of 30 recommended equities.
The Asian country’s government and central bank remain supportive of economic growth with policies that increase the money supply and boost exports. Chinese consumers are also opening their pocketbooks as retail sales rise more than 9 percent from a year earlier.
“The private consumption share of GDP in China overtook the investment share of GDP in 2016 as the primary driver of economic activity for the first time since 2004,” analysts Alexander Redman and Arun Sai wrote in a Credit Suisse report obtained by Newsmax Finance. “Growth in real retail sales, although towards the bottom of its 17-year range remains robust at close to double digit territory, among the strongest across emerging markets.”
The Shanghai Composite Index has risen about 9 percent in the past 12 months. The S&P 500 stock index of the most valuable U.S.-listed companies has gained 16 percent.
The London-based analysts first recommended investors put more money into China’s stock market in 2015, and on May 16 provided 10 reasons to have an overweight allocation to the country.
- The liquidity and policy environment remains stimulative for equities
- Chinese exports are returning to growth as overall EM GDP accelerates
- The Chinese consumer (now the main driver of GDP) remains buoyant
- Equities provide an inflation hedge for high savings in financial assets
- RMB is cheap to trend REER [real effective exchange rate] appreciation for the first time since 2012
- The residential real estate market is cooling off in an orderly manner
- Positive momentum for revisions, forecast and delivered EPS growth
- Margins, ROE and value creation are showing evidence of stabilizing
- Valuations are attractive though the usual sector bifurcation remains
- China remains deeply under-owned by EM (and global) equity funds
Credit Suisse’s list of 30 recommended stocks, some of which don’t have American depository receipts listed on U.S. exchanges, includes Tencent Holdings, Alibaba Group, China Construction Bank, Kweichow Moutai, China Pacific Insurance, Wuliangye Yibin, Jiangsu Yanghe Brewery, Inner Mongolia Yili, Foshan Haitian Food Company, WH Group and Qingdao Haier.