International financial institutions more positive on China’s stock market
Published: May 21, 2024 11:45 PM
A view of Lujiazui financial hub in Shanghai File photo: VCG

A view of Lujiazui financial hub in Shanghai File photo: VCG

International financial institutions are more positive on China's stock market, with Goldman Sachs having raised its 12-month target for the CSI300 to 4,100 points while UBS Group raised Chinese stocks to overweight.

Analysts said foreign financial firms' moves reflect their confidence in China's economic prospects, as a series of targeted macro-policies in various sectors such as real estate and the stock market continue to produce effects. They said that more long-term foreign capital is expected to flow into China's stock markets.

Goldman Sachs noted in a report released on Monday that the MSCI China Index had recovered 31 percent from its low in late January, outperforming most developed and emerging markets. The firm attributed the sound performance to a variety of factors, including the resilient Chinese economy and macro-policy support for the property and capital markets, according to a note sent to the Global Times.

The firm raised its 12-month target for the CSI 300 - an index tracking the 300 biggest traded companies on China's two bourses in Shanghai and Shenzhen - from 3,900 to 4,100 points.

UBS Group raised its recommendation on a key Chinese stock index to overweight in a rare upgrade in April, Bloomberg reported.
The A-share market has undervalued the effects of the favorable macro-policies the central government has rolled out. China's stock market has seen a rebound driven by net inflows of global capital since April 23, and it is expected to replicate the success of Japan's stock market after reforms, Meng Lei, a strategist for UBS Securities Co, said in a note sent to the Global Times on Tuesday.

Chinese Premier Li Qiang said at a meeting on Tuesday that the country should adhere to the fundamental purpose of the financial sector's role in serving the real economy, coordinate financial opening-up and security, and accelerate the construction of a modern financial system with Chinese characteristics. 

Related authorities should complete the task of reforming the local financial management system on schedule and strengthen the day-to-day supervision of local financial institutions, in a bid to firmly guard the bottom line of avoiding systemic financial risks.

Since January 2024, Chinese authorities have sent messages of policy support for the stock market. In April, the State Council, the country's cabinet, released a new guideline on strengthening regulation, forestalling risks and promoting high-quality development of the capital market, which greatly elevated market confidence.

Compared with the first two guidelines issued in 2004 and 2024, this year's new guideline stresses a people-centered principle. The A-share market is expected to become a new store of people's wealth, and it is set to provide stronger financial support for the development of new quality productive forces and tech innovation, according to Meng.

Recently, international financial institutions including Goldman Sachs, Morgan Stanley and UBS have upgraded their forecasts for China's economic growth this year. Also, the European Commission hiked its forecast for China's 2024 economic growth to 4.8 percent, up by 0.2 percentage points compared with its previous projection.

Along with the continuous improvement of the business environment, foreign enterprises are increasingly positive about the China market, Chairman for KPMG Asia Pacific and KPMG China Honson To told the Global Times.

According to the Ministry of Commerce, in the first quarter of 2024, the number of newly established foreign-funded enterprises rose by 20.7 percent year-on-year, underscoring multinationals' confidence in the sustained healthy development of the Chinese economy, To said.

Several foreign-funded financial institutions are moving to expand their presence in China. US payment company Mastercard's Chinese joint venture opened for business on May 9, and Allianz Global Investors in April obtained approval from the China Securities Regulatory Commission to operate as a wholly foreign-owned public fund management company in the Chinese mainland.

"More international capital is expected to flow into the Chinese mainland and Hong Kong stock markets in 2024, as the China market is a good place to diversify investment portfolios and explore value," Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times on Tuesday.

Data for April showed that the economy has extended its stable recovery. The issuance of 1 trillion yuan ($140 billion) worth of ultra-long-term special treasury bonds will further drive up investment and boost the economic recovery, Yang said.

He called for patience and confidence in China's economy and stock markets, stressing that value investing will bring excess returns for investors.