Our reporter Xie Ruolin

Trainee reporter Mao Yirong

Recently, many foreign institutions have expressed positive views on China's stock market. The latest report of Goldman Sachs raised the 12-month target of MSCI China from 60 to 70, and the 12-month target of the CSI 300 Index from 3900 to 4100, and maintained the over allocation proposal for A-shares.

From the logic behind it, on the one hand, the domestic economy has continued to recover. On the other hand, with the continuous promotion of capital market reform measures, under the low valuation level, the value of A-share investment has attracted more and more attention from overseas investors.

Huang Senwei, a senior market strategist of Lianbo Fund, told the reporter of Securities Daily that the advantages of A-share allocation continue to show, and the Chinese stock market has the opportunity to become one of the directions of global capital allocation in the near future.

Global investors are optimistic about the Chinese market

On May 20, the latest report released by Goldman Sachs showed that the MSCI China Index had risen by 31% since the end of January 2024, and 19% in the past month, outperforming most developed and emerging market stocks. The main driving factors of this rise include the resilience of China's economy, the strong performance of policy support, and the low starting point of valuation and investor sentiment.

The Chinese market is crucial for global investors. Chen Yanni, co CEO of JPMorgan Chase in China, said: "In the past 20 years, China has developed from the fourth largest economy to the second largest economy in the world, accounting for 16.9% of global GDP from 4.8%. In order to better make investment decisions in this evolving market, it is vital for global investors to have a deep understanding of the Chinese market."

From the policy perspective, the macro setting is more active. The multi asset team of Fidelity Fund believes that: "The meeting of the Political Bureau of the CPC Central Committee was held on April 30, and the policy setting is more active. Both the financial and monetary sides proposed to increase their strength."

Because of their optimistic outlook on China's economic development, many foreign institutions have raised their forecasts on China's GDP growth rate.

Zhu Haibin, chief economist of JPMorgan Chase in China and head of economic research in Greater China, said: "JPMorgan Chase raised the forecast of China's economic growth in 2024 in March, and raised the predicted growth rate of China's GDP in 2024 from 4.9% at the end of last year to 5.2%."

Wang Tao, head of Asian economic research and chief China economist of UBS, mentioned in his recent comments that after the GDP growth in the first quarter exceeded expectations, it is expected that the year-on-year growth rate of real GDP in the second quarter may remain around 5.3%.

Reform measures boost investor confidence

In addition to the continuous recovery of the macro-economy, the reform measures of the capital market have also improved the confidence of global investors. The multi asset team of Fidelity Fund believes that the new "National Ninth Rule" puts more emphasis on increasing dividend regulation and share repurchase of listed companies, and further strengthens the confidence of overseas investors.

Since the second quarter, A-shares have risen significantly. Wind data shows that since the second quarter, as of the closing of May 23, the Shanghai Stock Exchange Index has risen by 4.76%, and the CSI 300 Index and CSI 800 Index have also risen by 2.95% and 2.56% respectively.

Huang Senwei said that China's interest rate level is at a historical low, and the stock market valuation is even lower. The current estimated price earnings ratio of the CSI 300 Index is about 12.1 times, still lower than the long-term average, which is more marginal from the perspective of value investment. At the same time, China is one of the few countries that still intensively introduce favorable policies, including the new "National Nine Rules" to improve the quality of the capital market, and the issuance of ultra long term treasury bonds. At this stage, the marginal benefit of China's policy reform is relatively higher than that of other major markets in the world.

From the perspective of capital, recently, northbound capital has also made a substantial net inflow into A-share through the Land Port Link. By the end of April, Northbound Capital had increased its holdings of Chinese stocks for three consecutive months. Wind data shows that by the end of May 22, the net purchase amount of northbound funds in the year had reached 95.99 billion yuan.

Liu Mingdyspi, chief Asia and China equity strategist of JPMorgan Chase, said that the performance of Chinese enterprises represented by MSCI China Index had stabilized and rebounded. The performance of MSCI China Index has continued to decline since reaching its peak in the first half of 2021; however, according to the 2023 annual report released by listed companies in April, the performance of MSCI China Index in 2023 has achieved a year-on-year growth of nearly 9.3%.

"A-share allocation advantage continues to show." Huang Senwei said that the return on equity of A-share listed companies is currently about 9.9%, but the P/E ratio is low, and the Shanghai and Shenzhen 300 Index is about 12.1 times. Under the guidance of the new "National Nine Rules" and other capital market reform policies, if the shareholder returns of A-share listed enterprises can gradually increase, it is expected to usher in the opportunity of long-term valuation upgrading.

"By the end of March this year, four types of foreign funds, including regional funds, emerging market funds, U.S. funds, and global funds, had a low allocation of Chinese A-shares. Judging from the market rise in April and May this year, the degree of low allocation of foreign funds has narrowed." Liu Mingdi analyzed that each of these four types of funds, If the low allocation decreases by 25 basis points, the incremental capital will be about $39 billion.

In terms of industry allocation, Zhou Wenqun, deputy director of the stock department of Fidelity Fund, said: "We are still optimistic about the more certain high dividend sectors, including energy, consumption, finance, telecommunications, etc. When the economic growth enters a period of moderate stability, the low interest rate environment is expected to continue. With the continuous policy oriented support, it is expected that more A-share listed companies will increase their willingness to pay dividends, and the relative attractiveness of dividend yield will increase. "

Share to let more people see