BEIJING: China’s economy is expected to rebound next year and sustain the rally in Chinese equities, although market volatility may remain elevated, according to prominent investment banks and wealth managers.
“In terms of economic growth next year, China tells a rather compelling story compared with many global peers,” said Kinger Lau, chief China equity strategist at Goldman Sachs.
According to the investment bank’s forecast, China’s gross domestic product (GDP) growth may rebound from 3% in 2022 to 4.5% in 2023, meaning the world’s second-largest economy may outshine other major economies next year as global downward pressures intensify, Lau said.
Earnings growth of Chinese equities is expected to pick up as economic prospects improve.
Also, valuation levels may recover supported by market expectations over optimisations in Covid-19 containment, adjustments in internet sector regulations and signs of mitigating delisting risks facing US-listed Chinese issuers, Lau said.
Goldman Sachs remains overweight on Chinese equities and forecasts the benchmark CSI 300 index to reach about 4,500 points by the end of 2023, implying a 16% gain from now, Lau said.
Macroeconomic policy also favours Chinese equities.
China’s fiscal and monetary policies may maintain an accommodative stance with controllable inflation levels in the coming three to six months, versus the ongoing rate hike cycle in the United States and Europe to tame sticky high inflation, said Goldman Sachs’ chief China economist Shan Hui.
In terms of allocation among sectors, the investment bank has upgraded consumer services and healthcare equipment and services from “neutral” to “overweight” to capitalise on a potential rebound in consumer spending, while downgrading energy and tech hardware from “neutral” to “underweight”.
It also upgraded real estate from “underweight” to “neutral” as a series of supportive measures launched recently may help significantly tame the risks facing the sector.
China’s benchmark Shanghai Composite Index edged up by 0.05% to close at 3151.34 points on Wednesday, marking the highest level in two-and-a-half months and sending its gains since the beginning of November to 8.91%. — China Daily/ANN