China has again set a one-year GDP target of about 5% as analysts worry policy support will not be enough to achieve that goal.
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Lei Xiaoshan, founder and managing director of China Market Research Group, said Chinese stock market valuations are “too low” and investors should be cautious about re-entering the world’s second-largest economy.
New data showed China had its first month of inflation in February after four months of deflation, with consumer prices rising 0.7% year-on-year after falling 0.8% year-on-year in January.
However, Wren attributed this to the Lunar New Year period and insisted that deflation “still hangs over the Chinese economy”.
“We’re still seeing that Chinese consumers, especially wealthy consumers, are quite nervous – they’re still buying at reduced prices and skipping big-ticket items,” Rein told CNBC’s “Squawk Box Europe” on Monday.
“They’re wary of whether the government is going to launch a bazooka-like stimulus — which they’re clearly not going to do.”
In the short term, global luxury brands may continue to struggle from lack of demand in China, while domestic electric vehicle (NEV) manufacturers may struggle, he said.
China’s well-documented economic woes have led to broad stock market declines over the past year, and falling real estate and exports have weighed on economic growth. The Chinese government’s goal is to achieve 5% growth in 2024 and 5.2% in 2023.
“Admittedly, last week’s National People’s Congress work report promised to keep ‘money supply and credit growth consistent with real GDP and inflation targets,’ which may indicate that policymakers will work harder to push inflation towards last year’s 3% target,” Kay Investment Macro China economist Huang Zichun said in a research note on Monday.
“But we believe China’s low inflation is a symptom of its growth model based on high investment rates. Since reducing reliance on investment is still far away, we expect inflation to remain low in the long term.”
“It’s too early to call a bull market”
While near-term headwinds mean the investment outlook remains tricky, Lane believes steps taken to reconfigure China’s economy away from its traditional reliance on real estate and infrastructure are starting to have an impact, and the long-term outlook is brighter.
“China’s economy is weak, but not that weak. If you are a multinational, if you want to drive growth in the next three to five years, the next China is China. It is not India – India accounts for only six months of the global economy. One percent.” “China’s GDP – not Vietnam. These are small markets, so I actually think investors should look at China’s long-term development again, it’s definitely worth investing in,” he said.
“It’s too early to call a bull market, you still have to be very cautious, the economy is still weak – don’t get me wrong – the D-word (deflation) is looming over China again, the job market is still weak, but valuations are too low .”
Despite a slight rebound last month, Hong Kong’s Hang Seng Index is still down more than 14% over the past year, and Rein said he personally began investing in Hong Kong-listed A shares about a month ago because he believed, “The valuations were too low.”
