Factbox: Global investment banks upgrade China equities, brace for weaker yuan

SOL Global Investments

23/04/2024 08:01

HONG KONG, April 23 (Reuters) - Global investment houses
are increasingly bullish about Chinese stocks, driven by
resilient corporate earnings and policy efforts to boost
shareholder returns.
    China’s top securities regulator issued draft rules in April
aimed at bolstering the ailing stock market, including
strengthening the supervision of company listings, improving
corporate governance, encouraging dividend payouts, and
fostering long-term investment.
    The country's blue chip index  .CSI300  has risen 2%
year-to-date, and has bounced roughly 10% from the trough on
February 2. While MSCI China  .dMICN00000PUS , which tracks both
onshore and offshore Chinese stocks, has declined 2% so far this
year. 
    
Here is a summary of some house views on China stocks:
             INVESTMENT               April 2024
 HOUSE                    
                          
             UBS          Upgrades China and Hong
                          Kong stocks to overweight
             Goldman      Expects an up to 20%
 Sachs                    upside in China A-shares
                          
 
    KEY COMMENTS:
    UBS
    "The largest stocks in the China index have been generally
fine on earnings/fundamentals. So China underperformance is
purely due to valuation collapse."
    "What makes us more positive now on earnings are the early
signs of pick up in consumption - as seen through robust festive
holiday spending numbers year-to-date, listed consumer stocks
performing better than general consumption in the economy."
    
    Goldman Sachs
    "We triangulate the potential policy-driven upside through
the lens of shareholder returns, corporate governance standards,
and institutional investor ownership."
    "Our analysis suggests that A-shares could rise 20% if they
could narrow the gaps with international averages along these
dimensions, and could re-rate as much as 40% if they catch up
with global leaders in our blue-sky scenario.“    

    YUAN
    Investment banks expect the yuan to hit a trough of about
7.3 per dollar in coming months, before recouping some of the
loss to 7.19 at the end of this year.
    The Chinese currency  CNY=CFXS  has lost more than 2% to the
dollar so far this year, but its value against its major trading
partners, as measured by the CFETS index  .CFSCNYI , has risen
3.4% to 100.72, according to Reuters calculations based on the
official data.
    
Here is a summary of some forecasts for the Chinese currency:

                                              
 INVESTMENT HOUSE   end-Q2       end-Q3        end-2024
                                              
                    7.3          7.25         7.2
 GOLDMAN SACHS      (in 3-month  (6-month)    (12-month)
                    horizon)                  
                    7.3                       7
 STANDARD                                     
 CHARTERED BANK                               
                                              
                                 7.3          
 BARCLAYS                                     
                                              
             RBC    7.26         7.3          7.25
 CAPITAL MARKETS                              
                                              
             BOFA   7.35         7.45         7.45
                                              
             UBS                              7.1-7.2
                                              
             SEB                              7.1
                                              
             ING    7.25         7.18         7.12
                                              
 

 (Reporting by Summer Zhen and Winni Zhou; Editing by Michael
Perry)
 ((summer.zhen@thomsonreuters.com; 852-3462-7739;))