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HSBC Private Banking: CN Stock Mkt Still Has Room for Further Re-rating
Recommend 57 Positive 135 Negative 46 |
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Fan Cheuk Wan, Chief Investment Officer Asia, Global Private Banking and Wealth at HSBC, stated that the government work report of the Chinese central government passed at the closing session of the National People’s Congress highlights a policy shift toward technological innovation, boosting consumption, and supporting private enterprise development. She noted that these priorities provide a positive impetus for the re-rating of China’s stock market. Given continued emphasis on RMB exchange rate stability, the People’s Bank of China (PBOC) has relatively limited room for interest rate cuts, Fan pointed out. HSBC anticipated a modest reduction of 30 bps in policy rates within 2025, alongside a further 50 bps cut in the reserve requirement ratio (RRR). The positive policy signals from the Two Sessions reinforce HSBC’s overweight stance on Chinese equities and USD-denominated investment-grade corporate bonds from China, she added, assuming that the Chinese stock market still has room for further re-rating, with internet and technology stocks leading the rally. This optimism is propelled by catalysts such as breakthroughs in AI technology in the Chinese market, gradually improving earnings expectations, conservative positioning by foreign investors, and considerable valuation discounts, all of which contribute to an attractive risk-reward outlook. Even after a robust market rebound over the past month, the 12-month forward P/E for the HSI and the MSCI China Index stood at just 11x and 11.9x, respectively. These figures reflected marked discounts of 47% and 43% compared to the S&P 500’s forward P/E of 20.9x. Chinese internet stocks, with a 12-month forward P/E of 16.2x, trading at a 39% discount to the 26.6x P/E of the U.S. "Magnificent Seven" tech giants. HSBC remains optimistic about AI leaders and adopters in sectors such as the internet, e-commerce, software, smartphones, semiconductors, autonomous driving, and robotics. Beyond technology stocks, the bank also favors leading companies in China’s consumer, financial, and industrial sectors, as well as high-dividend-paying quality state-owned enterprises. AAStocks Financial News |
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