StockTalk (5.10): Assessing China's Economy - Signs of Resurgence or Depression?
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Today's topic is about the China's Economy.
Assessing China's Economy - Signs of Resurgence or Depression?
The present condition of China's economy is a topic of intense speculation and debate. While recent reports have indicated a decline in the service industry business activity index in China (service industry PMI) for April, falling by 1.4% compared to March's 28-month high of 57.8, the value of 56.4 remains historically high and has indicated consistent expansion over the past four months.
However, there are concerns regarding China's economic performance. The data released by the General Administration of Customs of China on May 9th showed a significant shrinkage in imports during April, with export growth also slowing down. This indicates weak domestic demand in China's economy amidst global slowdown. As a result, mainland China and Hong Kong stocks fell on Tuesday, with the Shanghai Composite Index closing down 0.9%, while the Shanghai Composite Index fell 1.1%. Hong Kong's Hang Seng fell 2.1% and China Enterprises fell 2.4%, recording their worst performances in nearly two months.
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GodSpeed289 : Not a good time yet. China's economy is essentially supply driven rather than demand-driven, and it is really heavily dependent on real estate. The GDP numbers do not lie. Easing up of the Chinese Government’s regulatory crackdown in tech companies will be a key factor. As well as the “common prosperity” agenda. The rapid decline in the chinese property market could affect the economics of China as a whole. Hence, you’ll need to weigh those before making a decision to buy China stock.
doctorpot1 : investing in China right now do have quite substantial risk but it also bring about huge potential rewards. the US China tension, the potential new war, the sanctions and trade war. all these adds a lot of risk and uncertainty to the Chinese market, thus the price is still depressed despite showing good numbers. but that also means that we can get it cheaper and if the economy rebound, then huat liao
ZnWC : Reason to invest in China:
1. 2nd largest economy in term of GDP - too large to ignore
2. Economy recovering after travel restriction lifted
3. Many US companies invest directly or indirectly in China
Risk investing in China:
1. US-China tension on Taiwan issue
2. Low inflation and growth is slowing, may experience stagflation
3. Population is shrinking and ageing - affect demand
Despite the risk, I'll keep some China stocks in my portfolio but not many like Warren Buffett. Diversification is the key in investing amid a recession fear.
bullrider_21 : The best time to buy China stocks was in Oct last year when rumours of it easing Covid-19 restrictions surfaced. The rumours turned out to be true when China reopened from its zero- Covid policy by lifting most restrictions in Dec. The MSCI China Index bottomed and surged because investors were expecting a strong rebound from the reopening. The $CSI 300 Index (000300.SH)$ rebounded 22% by Jan this year.
But the rebound turned out weaker than expected. Consumption and manufacturing were lower than expected. Tech stocks, the biggest gainers, fell back on fears of U.S. sanctions. U.S.- China tension is a risk to a market rally. The CSI fell around 43% from its Jan peak.
But China has set a target of 5% GDP growth target this year. If the growth is slower than expected, China would undertake stimulus measures.
The pullback may be a good time to buy. This 2 weeks, Chinese financial stocks continued on their 6- day winning streak, the longest in 4 months. Brokerage shares also surged as much as 4.1%, reaching its highest level in 11 months.
The latest gains in major state firms from banks to securities firms and telecom operators indicate that Beijing's pledge to widen funding access for them has offered investors a fresh reason to restart a stalled reopening rally. Several Chinese lenders' recent decisions to cut deposit rates also have boosted appetite for the banking sector.
When the market sentiment is still fragile and investors are relatively conservative in their moves, bank names are often favoured in China. Investors like their dividend yields and the call from the authorities to discover the value in central (State- owned Enterprises) SOEs.