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Invest Shanghai
Multiple foreign financial institutions including Goldman Sachs and UBS are increasingly upbeat on China's stock market, bolstered by the country's supportive measures announced on Wednesday aimed at stabilizing markets and sustaining the economic recovery amid external headwinds.
"We stay Overweight on China equity in regional context," Goldman Sachs strategists including Kinger Lau wrote in a note published on Thursday. These analysts nudged up their 12-month target for the MSCI China index to 78, implying 7 percent potential returns, while raising the CSI300 target to 4,400, signaling 15 percent potential returns.
The MSCI China Index includes large and mid-cap Chinese companies, while the CSI300 index is a free-float weighted index that consists of 300 A-share stocks listed on the Shanghai Stock Exchange or the Shenzhen Stock Exchange.
A-share companies achieved a 3.5 percent year-on-year increase in overall earnings growth in the first quarter, rising to 4.2 percent when excluding financial stocks. This was a significant improvement compared with the decline of 13.7 percent year-on-year in the fourth quarter of last year, which demonstrates restored market confidence in future profitability, Meng Lei, China equity strategist at UBS Securities, wrote in a note sent to the Global Times on Thursday.
Although the A-share market faces multiple uncertainties, listed companies' improved earnings inject stability into the market, Meng wrote, while remaining optimistic about investment opportunities in sectors including domestic consumption, sci-tech self-reliance, and high dividend-yielding stocks.
The People's Bank of China, the National Financial Regulatory Administration and the China Securities Regulatory Commission (CSRC) announced a raft of financial policies on Wednesday to enhance liquidity, support key sectors and stabilize the capital market, which included policy rate and reserve requirement ratio cuts, as well as policies to bolster the capital market.
"The encouraging aspect of the latest easing package is that the policy responses are targeted and increasingly demand-side-oriented, reinforcing the government's objectives of stabilizing the housing market, enhancing social safety nets, developing the service economy, supporting small and medium-sized enterprises (especially those that export to the US), promoting cash returns to equity shareholders and fostering a healthy stock market with anchored capital," Lau noted.
The positive signals released at this conference will further stabilize economic growth, market confidence, and expectations, boosting investor sentiment amid external uncertainties, Allianz Global Investors Fund Management Co said in a note sent to the Global Times.
The A-share market is transitioning toward a re-evaluation cycle, where an economic transformation driven by cutting-edge technologies like AI and quantum computing will achieve milestone breakthroughs, while companies' long-term competitiveness and profitability prospects are becoming clearer, according to the note. It said that geopolitical tensions and US tariff policies may cause short-term volatility, but will not derail the broader market's reassessment trajectory.
Although China's stock market posted steep losses in the wake of the global financial turbulence triggered by US tariffs levied against its trading partners in early April, the market has almost fully recovered, demonstrating its resilience.
Chinese stocks closed higher on Thursday, with the benchmark Shanghai Composite Index up 0.28 percent to 3,352 points, while the Shenzhen Component Index closed 0.93 percent higher at 10,197.66 points.
"We have solid economic fundamentals, sound macro policies and reliable institutional guarantees, all injecting much-needed certainty into China's economy and capital markets amid global uncertainty," Wu Qing, head of the CSRC, told a press conference in Beijing on Wednesday.
Casting a vote of confidence in China's economic prospects and the long-term potential of the country's capital market, foreign institutions have accelerated their pace of further investment in China.
For example, JP Morgan Asset Management (China) Co announced on April 30 that out of confidence in the high-quality development of China's capital market and the company's asset management capability, the company will use internal capital of no less 54 million yuan to buy shares in its newly launched equity mutual funds, and it will hold these shares for at least one year.
"China's institutional reforms will further enhance capital market resilience," Wan Zhe, an economist and professor at the Belt and Road School of Beijing Normal University, told the Global Times on Thursday.
The CSRC has announced that it will soon roll out new measures to deepen the reform of the STAR market and ChiNext board, while increasing the inclusiveness and adaptability of systems in aspects such as the multi-layered review mechanism and investor protection. These measures will help improve the quality of listed companies and attract long-term capital, Wan said.
In particular, new policies attach importance to the in-depth integration of technologies and industrial policies, which will encourage capital to tilt to strategically important emerging industries and optimize the industrial structure of the capital market, Wan said, expressing confidence in the long-term healthy development of China's capital market.