Friday, July 19, 2024

Plenty of opportunities on China’s stock market, says Invesco

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China’s economic growth remains optimistic, as does the current valuation of Chinese equities, according to an outlook recently released by investment management organization Invesco China.

With the economy maintaining recovery in the second quarter, the outlook expects China’s exports and domestic demand to rebound in the second half of the year, with exports, especially to the Association of Southeast Asian Nations (ASEAN), Latin America and Africa, expected to grow, reflecting the trend of Chinese companies expanding their global business.

Manufacturing exports also grew year on year in the first quarter, indicating increased business activity and production for Chinese companies, the benign momentum of which would hopefully be maintained in the second half.

In addition, data on retail sales, tourism, and the automotive sector were all positive, with retail sales up nearly 5 percent year on year and the e-commerce sector expanding particularly rapidly.

During this year’s May Day holiday, tourism receipts were up 13.5 percent annually compared to pre-epidemic levels, and the outlook anticipates China’s consumption to grow in the second half.

On the investment side, the Chinese stock market remained positive in the first half.

Both onshore and offshore Chinese equities have been delivering positive returns since the beginning of the year, with the raw material, industrial and communication service sectors all achieving good results.

“Looking ahead, we see plenty of investment opportunities in Chinese equities, mainly around themes such as global supply chain restructuring, electrification, and the energy revolution,” said Ma Lei, chief investment officer of Invesco China.

He believes that companies in these sectors will have stronger earnings growth and overall growth prospects in the coming years.

“Currently, Chinese companies enjoy the cost advantages of a large local market and economies of scale. They are also expected to benefit from supply chain and global business expansion, thus capturing a higher global market share.”

Quite a number of Chinese companies are also benefiting from the global transition to clean energy and are expected to play a key role in the electrification and energy transition trend, due to their key position in the overall green supply chain, as well as cost efficiencies through the large domestic market, according to Ma.

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