According to Citigroup's research report, of the 451 A-share and H-share companies covered, 32% recorded better-than-expected first-half performance, while 36% underperformed expectations. Due to the slowing growth of the Chinese economy, it is expected that a higher proportion of companies with underperforming performance can be seen from the perspective of electricity demand growth and purchasing managers' index.
In terms of industries, Citigroup has upgraded its view on telecommunications stocks from "neutral" to "shareholding" due to their outperforming performance and attractive dividend yields. However, concerns about declining sales volume and prices have led to a downgrade from "shareholding" to "neutral" for basic materials stocks. The bank maintains its "shareholding" view on industrial, internet, and technology stocks. Considering the higher valuation discount of H-shares and the benefit from the US interest rate cut, the bank is bullish on H-shares compared to A-shares. Tencent (00700.HK), GDS Holdings (09698.HK), PICC (01339.HK), and Haier Smarthome (06690.HK) are the top choices for H-shares, with ASMPT (00522.HK), Cogobuy (00669.HK), and BYD Company Limited (01211.HK) being retained as the preferred stocks.
Furthermore, due to the downward revision of the bank's forecasts for corporate earnings, Chinese power demand, and M2 growth, the bank has lowered its year-end target for the Hang Seng Index by 3% to 19,800 points, and its target for the first half of 2025 by 5% to 21,000 points.
