The Chinese economy suffered strong blows in recent years but the outlook is good for the stock market, although with some precautions. What papers to invest in.
Cedears: recommends 5 Chinese companies to take advantage of the rebound in Beijing’s economy
China suffered a strong impact on their growth rates in recent years due to the implementation of Covid Zero policies. Besides, the strong crisis in the real estate sector and a deterioration in its relations with Western countries, added to the geopolitical wars, impacted its Economy. The difficulties led to a sharp decline in the prices of their companies. However, It seems that there is light at the end of the tunnel and there are already certain specialists who recommend looking at some Chinese papers, although with some caution.
To see how it comes the second economy in the world today you have to take a tour. The economy Chinawhich before the pandemic had rates of growth of the order of 6.5% annually, in 2020 it slowed to 2.2%, due to the “Covid Zero” policy that generated strong restrictions. Subsequently, After a strong rebound, in 2023 growth stood at 5.2%, and is expected to reach 4.7% in the current year. Among the factors that still weigh on the macro are: crisis in the real estate sector, a large fiscal deficit, unemployment and deflationary pressures.
Nicolas RosetGlobal Market Strategy Analyst at Cohen explained, in a report he authored, how, in addition to the local particularities of the Asian giant, the international context affected him in recent years: “The ups and downs that the country went through also occurred in a global context of wars and geopolitical crises that did not help the economy either. This fueled the decline in the Chinese stock market as American investors unloaded positions in the face of trade and technology wars.”
The same analyst, however, explained that the outlook is good for the stock market, although with some precautions. In this regard, he mentioned that The Government of China is buying papers through Central Huijin Investmentsan entity within China’s sovereign wealth fund, and that the State Council issued “9 key points” to improve the local securities market, among which are detailed: control the offering of IPOs, encourage companies to pay dividends, and promote banking and trust products.
Li Qiang took over as prime minister in March 2023, and his pro-market vision goes against interventionism in the private sector. During his participation at the World Economic Forum, Li Qiang reflected a more open approach to dynamics compared to his predecessors, market experts indicated. Although the Chinese economy still has obstacles to resolve, it is the second largest economy largest in the world with a gross product (GDP) four times larger than that of Germany.
Cedears: is it time to invest in shares of Chinese companies?
“The answer is yes, although the factors that affect its economy should be closely monitored”he told Ambitthe analyst Mariela Brandolin together with Fynx Global. “Although in recent years it has faced challenges such as the economic slowdown and the aging of its population, “It remains one of the largest and most dynamic economies in the world.”complete.
What is the main risk to take into account today? For the expert, the risk is the geopolitical context. “One of the companies you can invest in is Alibaba. This technology companycontinues to be a leader in innovation and can offer great growth opportunities”Brandolin said.
For its part, Maximiliano DonzelliResearch Manager at IOL investonline, said: “Despite the economic and geopolitical challenges faced by China in recent years, The Chinese market represents a window of opportunity for strategic investors. The combination of attractive valuations, more market-friendly policy signals, and a possible near-term strategic rotation in global capital flow dynamics suggests that now may be an opportune time to consider including these assets in investment portfolios. “.
Cedears of Chinese companies: Which ones should you invest in?
- Alibaba (BABA): It is the largest online and mobile commerce company in China. After the declines in 2022 and 2023, Alibaba shares are at relatively attractive prices, offering significant upside potential.
- JD.com (JD): It offers online retail, online marketplace and marketing services, including electronics and home appliances. It also provides marketing services for third parties on its online platform.
- Baidu (BIDU): The search engine of Asian origin has been working on the application of AI for more than 5 years. It has its own version of ChatGPT, called ERNIE.
- TCOM (Trip) is a Chinese provider of travel services including accommodation booking, transportation, tours and corporate travel management. Founded in 1999, the company also owns brands such as Trip.com, Skyscanner, Qunar, Travix and Ctrip, all online travel agencies. So far this year it has accumulated growth of 54% in dollars.
- Aluminum Corporation of China Limited is one of the largest aluminum companies in the world. Founded in 2001 and headquartered in Beijing, China, it operates along the entire aluminum value chain, from bauxite mining to the production of primary aluminum and semi-finished products. So far this year, it has accumulated a profit of 35% in dollars.
Source: Ambito
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