Citigroup released a research report that the highly anticipated third plenum will be held from July 15th to July 18th, and exports and non-real estate infrastructure investment are expected to remain the main drivers of the Chinese mainland economy in the second half of the year. The bank pointed out that although China is expected to achieve a 5% economic growth target this year, it is expected to take more time and policy measures to enhance investor confidence, and major policy breakthroughs are not expected in the second half of the year other than gradual measures.
Citigroup expressed a bullish outlook on stocks that could benefit from rising exports and commodity prices, with PDD Holdings (PDD.US), ASMPT (00522.HK), Aluminum Corporation of China Limited (02600.HK), Techtronic Industries Company Limited (00669.HK), MGM China Holdings Limited (02282.HK), Li Ning Company Limited (02331.HK), and BYD Company Limited (01211.HK) as the top picks in the market.
Citigroup also listed eight major catalysts, ranked by the probability of their occurrence: (1) structural reform, expected to impact major industries such as electrical utilities, real estate, and insurance; (2) cross-border trade development of renewable energy and power grid equipment, automobiles, and semiconductors; (3) state-owned enterprise reform in the telecommunications, banking, and insurance industries; (4) the relaxation of real estate policies to help the housing market, banks, and insurance industry; (5) addressing overcapacity issues in the solar energy, materials, and semiconductor industries; (6) using consumption and the internet industry to cope with an aging population; (7) the revival of consumption and the internet industry; and (8) the promotion of the internet, IT services, and software industry development through measures to support private enterprises.
The bank currently predicts that the People's Bank of China will cut interest rates by 10 basis points each in the third and fourth quarters of this year, with RMB forecasts of 7.25 and 7.35 against the US dollar for the next three months and six to twelve months, respectively.