Three invetment themes to watch amid China's trifecta of stimulus
China has received a trifecta of stimulus to fast-track its economy, which will thrust Chinese consumer spending stocks, electric vehicle industry companies and building sector-related stocks into the spotlight.
For investors this represents an opporunity, 'as where macro funds go, investment flows'. What I mean by that is, what happens in the macro economic climate, typically dictates where funds go, and that tends to drive investment markets.
So, you could expect Chinese-facing companies, in these respective industries to see a pickup in earnings for the quarter, and you will likely see such Chinese companies upgrade their earnings ahead.
So, you could expect Chinese-facing companies, in these respective industries to see a pickup in earnings for the quarter, and you will likely see such Chinese companies upgrade their earnings ahead.
With this in mind, investors need to remember the basic fundamentals of stock picking; that earnings and earnings revisions to the upside, meaning earnings upgrades, both drive share price growth.
So, what stimulus has been announced of late in China?
1- Well, firstly China's central bank, the People's Bank of China (PBoC) slashed two key lending rates for the first time since August 2022, this week. The Chinese central bank cut the one-year loan prime rate by 0.10% from 3.65% to 3.55% and trimmed the five-year loan prime rate by 0.10% from 4.3% to 4.2%
2- Secondly, this week, China unveiled a 520-billion-yuan ($72.3 billion) package of tax breaks over four years for electric vehicles (EVs) and other green cars. That’s the biggest round of stimulus to boost EV auto sales.
3- And thirdly China is celebrating Dragon Boat Festival. Its one of China's four major traditional festivals. Shopping malls will be teaming with people. This comes at a time when China just wrapped up its first major shopping festival, after the pandemic. ‘The 618 festival, as its known, was named after the founding date of JD.com but was embraced by all platforms and ran from late May until June 18 2023.
For investors, amid China's new stimulus, it seems means, it could be time to keep stocks on your radar that will likely see a significant pick up in earnings, as that will likely drive share price growth. For many investors, this could be seen as a buying opportunity.
To give you an example of some companies that have benefited already from the consumer spending push, shares in Golden Eagle, which mainly sells high-end cosmetics, apparel, shoes, jewellery is trading up 38% so far this year.
Another example of a company that's benefiting from China's push to green vehicles is Yadea, the worlds largest electric scooter company, its shares are up 32% so far this year.
If you are seeking inspiration, ideas of companies that could benefit from China's EV stimulus; refer to MooMoo's EV industry stocks, which can be found in MooMoos app, under Markets> Explore > Industrial Chain > EV.
If you are looking to get potential ideas or inspiration for those companies that could benefit from China's central bank cutting its key interest rates, you can find building industry-related stock ideas on MooMoo's app > Markets> HK> Concepts. There you will find the Mainland Real Estate Concept, Blue Chip Property Concept, Steel Concept, Building Materials Concept, Mainland Property Management Concept.
If you are looking for potential consumer spending stocks that might benefit from a pick up in consumer spending amid Dragon Boat Festival and the 618 festival, head to MooMoo's app> Markets> Concepts. There you will find the Department Store Concept, Luxury Goods, Hong Kong Retail Stocks.
Alternatively, for investors, who would prefer to look at ETFs instead of stocks they can do that too.
#EV #earnings #china #stocks #lithium #EV Building #BHP #Resources #Mining #China
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moomoo Official Market Strategist
Investment strategist. I dissect markets and share investment opportunities. I am featured on TV & radio etc
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Captial Gains : i agree with amazing out look on your take on ecomnics
Jessica AmirOP : Thank you. When investors think about the flow on effect on how China's central bank cut its rates, people tend to forget... it effects a lot of things. Not just building and construction stocks in HK and China, but also the global commododity companies who supply resources, that are needed to make building materials. There is a jolly good reason that BHP (the world's biggest iron ore producer) has been one of the most traded stocks at moomoo in the year that just passed on June 30. Iron ore is of course needed for steel.