Citigroup has a positive view on Chinese high-yield stocks and Chinese network technology stocks. Schroder Investment believes that there are opportunities in the theme of corporate reform in China. UBS Group is bullish on targets with high dividend yields under the 'value' style as short-term defensive positions, and long-term consideration can be given to laying out some high-quality growth stocks at low levels.

JPMorgan's Chief Asia and China Stock Strategist, Liu Mingdi, believes that the signs of China's economic recovery are more evident, which is bullish for the company's performance and further supports stock valuations. Companies with high market share, leading enterprises in segmented markets, cost-effective export-oriented enterprises, and companies benefiting from artificial intelligence (AI) rapid development are worth paying attention to.

Foreign institutions are bullish on Chinese assets.

Recently, many foreign banks have put forward their latest opinions on the macro economy and stock market in the second half of the year.

Schroder Investment is more positive about the long-term outlook for the Chinese stock market. They believe that if viewed from a perspective of 2 to 3 years, the Chinese stock market has greater upside potential than other stock markets. Wu Sitian, Chairman of Schroder Investment Group-China Affairs, pointed out that China's regulatory authorities have made tremendous efforts in promoting modernization and opening up China's capital markets. "We maintain long-term confidence in the sustained development of China's capital markets. Reform and opening up are still key words, and regulatory authorities are striving to promote more reform and opening up."

Citi's head of investment strategy and asset allocation, Liao Jiahao, expressed optimism for Chinese stocks that benefit from policy supply and have good profit performance, including network technology stocks, high dividend-paying mainland bank stocks and Chinese telecommunications stocks. He explained that the first quarter performance of Chinese network technology stocks was generally better than expected, and the application of AI is expected to help network technology companies optimize costs and improve profit margins. In addition, the first quarter of Chinese network technology stocks actively improved shareholder returns, so outstanding network technology leaders are expected to outperform the broader market, recommending network technology stocks including e-commerce, mobile games, and shared transportation platforms.

In terms of Hong Kong stocks, Citi maintains their view that the Hang Seng Index will have a target of 19,800 points by the end of this year, which has a one-tenth upside from current levels.

UBS Securities is bullish on targets with high dividend yields under the 'value' style as short-term defensive positions, and long-term investors can start considering laying out some high-quality growth stocks at low levels. UBS Securities analyst Meng Lei predicts that large-cap stocks will continue to outperform mid- and small-cap stocks due to higher earnings visibility and the potential for net inflows of long-term funds. In terms of industry allocation, UBS Securities recommends an overweight rating on the electronics, energy, utilities and telecommunications sectors. In terms of investment themes, it is bullish on high-quality state-owned enterprises under the background of 'Chinese characteristic valuation system'.

JPMorgan has been totally bullish on Chinese stocks since the end of October 2023. Liu Mingdi pointed out that there are four themes worth paying attention to: stocks with high market share in the domestic market, stocks that are able to increase market share in the moderate economic recovery period, leading enterprises in segmented markets, cost-effective export-oriented enterprises, and companies benefiting from rapid development of AI.

Nomura Orient International Securities believes that China's current high value-added manufacturing going overseas, the replacement of consumption, and cultural spillovers will become new fulcrums for leveraging China's economic transformation. Valuations of food and beverage and social service and other consumer sectors on the market are at historical lows, and low valuations are a favorable direction for resisting current global uncertainties. Under the trend of long-term decline in interest rates, the dividend concept continues to have investment appeal. Faced with more intense overseas competition, gradually mature companies need to pay more attention to improving operating efficiency while expanding R&D, and the implementation of the new 'nine initiatives' also means that Chinese listed companies will pay more attention to improving shareholder returns and corporate governance, all of which will enhance the attractiveness of Chinese stock assets in the long term.

In fact, in terms of valuation levels, Chinese assets, especially Chinese stocks, currently have a significant valuation advantage in major global markets. According to Huaxi Securities research as of June 28, the average price-earnings ratios (PE, TTM) for the SSE Composite Index, Shenzhen Component Index, CSI 300 Index, and Chinext Price Index were 13.20 times, 20.77 times, 11.84 times, and 25.88 times, respectively, all below the historical median of 13.31 times, 23.75 times, 12.19 times, and 50.67 times since 2010. By contrast, the PEs of the S&P 500, Nasdaq Composite Index, and Dow Jones Industrial Average were 27.30 times, 43.67 times, and 27.45 times, respectively. In terms of stock and bond yields, according to research reports from Yongxing Securities as of June 26, 2024, the dividend yield of the CSI 300 Index was 3.3%, the 10-year national bond yield was 2.22%, and the stock-bond yield was -1.08%, which is still relatively low compared to the relative low since 2012, indicating that the current A-share market has a high investment value.

Effective policies may help stabilize and boost the market.

With the further strengthening of expectations for the stabilization and recovery of the Chinese economy, foreign institutions have also raised their expectations for China's economic growth, which may become positive factors driving the stabilization and upward trend of the A-share market.

Barclays has raised its forecast for China's GDP growth rate in 2024 from the previous 4.4% to 5%; given that the increase in exports and fiscal support help to consolidate the resilience of the economy, Fitch Ratings has raised its forecast for China's GDP growth rate in 2024 from 4.5% in March to 4.8%; Goldman Sachs has raised its forecast for China's economic growth rate in 2024 from 4.8% to 5%.

Industry insiders generally believe that the collective upward revision of China's economic growth expectations by international institutions indicates their full confidence in China's economic growth prospects and full trust in its resilience and potential. Fidelity International has stated that China's economy is in a "shift phase" of structural adjustment and will gradually achieve dynamic transition, building a development pattern dominated by new economies such as energy transformation, technological innovation, and medical health. The construction and improvement of strategic industries will further promote high-quality and sustainable development of the economy and national productivity.

Meng Lei pointed out that since mid-January, government departments have made a series of efforts to stabilize the market and boost confidence. These include the People's Bank of China's reserve and interest rate cuts; Central Huijin's announcement of full recognition of the allocation value of the current A-share market; national-level support for high-quality listed companies; inclusion of market capitalization management into the assessment of head of state-owned enterprises by the State-owned Assets Supervision and Administration Commission of the State Council; the government work report emphasized enhancing the intrinsic stability of the capital market; the new "National Nine Articles" is aimed at promoting high-quality development of the capital market and enhancing investor returns; and the trading volume of major stock index ETFs has significantly increased again after a recent market correction, etc. As many policy bullish factors gradually take effect, they may push the A-share market to stabilize and rise.

Edited by Jeffrey