The case for buying Chinese stocks is improving as markets soar after President Xi Jinping's recent meeting with business leaders, an AI breakthrough and slow start to U.S. tariffs, according to stock analysts at several investment banks.
Bank of America Securities said a shift from "tradable" to "investable" may be underway as longer-term tailwinds from rising dividends and investment flows from insurers could swing behind recent sharp gains and drive a durable rally.
The Hang Seng came within a whisker of three-year highs on Tuesday as investors cheered Xi's meeting with tech leaders as a sign of detente between private enterprise and the Communist state and that a crackdown on tech giants was over.
With a sweeping 13.8% rise, Hong Kong's benchmark is the second-best performing major market this year, behind Germany's surging DAX. Big foreign investors, however, have kept to the sidelines so it would be significant if they turned buyers as some of the investment banks are starting to suggest.
"(Last year) many investors we spoke to still regarded China as a 'trading market' - fast money comes and goes to play the trading bounces, whereas global long-term capital remains unconvinced and little involved," Bank of America's China equity analysts said in a note dated February 17.
"Encouragingly, we think the fundamental investment thesis for China has been improving."
On Monday Goldman Sachs upgraded its targets on Chinese stock indexes, estimating that AI adoption could boost earnings growth and potentially bring in $200 billion of inflows.
Analysts at Citi said Xi's meeting with Jack Ma and other tech leaders "confirmed a supportive stance" even if there were no clear policy actions while Macquarie said it was a pro-business shift aimed at boosting confidence.
"Jack Ma's appearance is highly symbolic, as his company bore the brunt of the previous regulatory campaign," Macquarie economists Larry Hu and Yuxiao Zhang said in a note.
Source : Investing.com