China has said it plans to revitalize these industries.Stocks want to play with trends | Private Equity Weekly
China may not have announced bazooka-like stimulus measures at its annual parliamentary meeting last week, but it made clear which industries it would support. Beijing announced a GDP growth target of around 5% and an official fiscal deficit of 3%, in line with last year’s target. Authorities announced plans to issue “ultra-long” bonds for special projects, while signaling they may still deploy other stimulus tools. “Although the fiscal stimulus may not be significant and potential real estate risks still exist, we believe that the strategic focus of cultivating new productivity, developing the digital economy, promoting domestic consumption and continued opening up should be conducive to earnings growth and create structural stability in the A-share market. Opportunities,” HSBC China equity strategist Sun Yu and his team said in a note on Wednesday. Over the past week, China’s top economic planning body has talked about how a push to upgrade equipment will generate more than 5 trillion yuan in annual spending, equivalent to about $700 billion in annual corporate capital expenditures. The Ministry of Finance stated that tens of billions of yuan will be allocated for the development of manufacturing and vocational education this year. HSBC analysts said that China’s annual government work report “once again emphasized the high-quality development of the digital economy and specifically mentioned the ‘artificial intelligence +’ initiative to promote the digitization of traditional industries.” They said: “Therefore, we believe that industries related to the digital economy will benefit, including industries related to artificial intelligence servers and network hardware, as well as software application (AI+) related industries such as network security.” Make a lasting impression. After experiencing volatility at the beginning of the year, the Shanghai Composite Index rose by about two-thirds last week, with gold and power generation-related stocks seeing the largest gains, according to Wind Information data. Morgan Stanley equity strategist Laura said that the new securities regulator Wu Qing made his first major media appearance on Wednesday and conveyed mostly “positive messages”, including strengthening investor protection, attracting long-term capital and encouraging dividend payments. . Wang. However, she noted in a separate note that sentiment around mainland China stocks, known as A-shares, “fell significantly after peaking last week” due to a lack of announced policy support. “Microsoft’s economic team believes that the fiscal package announced is not enough to boost the economy because the fiscal package is still supply-focused,” Wang said. “New Productivity” The success of electric vehicles made in China and the situation with technological constraints in the United States Since then, Beijing has been promoting the development of domestic technological and industrial capabilities. One of the popular political terms that has emerged due to high-level mentions by Chinese President Xi Jinping is “new productive forces” or driving forces. An example of how the saying is spreading was last week’s efforts by officials in Chongqing, a large city with a population of about 32 million, to demonstrate how they are prioritizing digitalization and high-end manufacturing. They describe the new “powers” as greater technological innovation, greater efficiency and better environmental friendliness. HSBC analysts said: “Policy support for the development of advanced production capacity will lead to increased capital expenditures in related value chains such as industrial and information technology sectors.” Here are some of their picks for buy-rated stocks, the first two of which are for “new productivity” Investment, the latter two are investments in artificial intelligence-generated content. These four stocks are all listed in Shenzhen: Inovance Technology – As a seller of factory automation components, Inovance Technology should “benefit from a recovery in the discrete automation market in 2024,” analysts at Inovance said. Their target price is 83 yuan per share, an increase of nearly 24% from Friday’s closing price. Northern Huachuang – Based on Friday’s closing price, this chip industry stock is currently only 3% higher than the target price of 309.7 yuan set by HSBC Bank. But analysts expect that “North Huachuang Technology will benefit from increased capital expenditures on (third-party integrated circuit packaging and test services) as it offers a broad range of products in advanced packaging.” InnoLight Technology – Optical Fiber Company, for Cloud computing and artificial intelligence provide network infrastructure. HSBC analysts expect InnoLight to increase sales of its most advanced products and launch better products in the fourth quarter. The stock closed about 5% above HSBC’s target price on Friday. Sanqi Entertainment – HSBC analysts expect the gaming stock’s share price to nearly double to 36 yuan per share. “We like Sanqi because it is strong in small games and has a rich product line,” the report said. No matter how strong industrial growth may be in the short term due to top-down policies, many analysts warn that China’s economy The overall problem remains unresolved. Clocktower Group said in a report on March 5, “With Beijing remaining unwilling to provide stronger stimulus measures, it is difficult to see how to effectively reverse the ongoing deflationary spiral.” The report stated: “The most important thing for us is The concern is that escalating overcapacity problems in the industrial sector may begin to force manufacturing companies to slow down production and capital expenditure, which may lead to a sharp decline in domestic credit demand.” If credit demand from the private sector falls further, Beijing has expressed concerns about fiscal prudence and The obsession with deleveraging local governments will prove suicidal. —CNBC’s Michael Bloom contributed to this report.
