Are Chinese stocks on the rebound or are more declines on the horizon? That’s the question on investors’ minds as they navigate the uncertain landscape of the Chinese market. The recent sell-off has left many wondering if the worst is yet to come.
Despite the unclear outlook, Evercore ISI strategists see potential opportunities in specific U.S.-listed Chinese stocks. They believe that many of these stocks are oversold and could outperform in the coming years. By screening for companies with more than $1 billion in capitalization and expectations for earnings growth, they have identified potential winners in the market.
One of the key factors in Evercore’s analysis is the anticipation of further policy action from Beijing after an annual parliamentary meeting in early March. This could provide a much-needed boost to the market. Additionally, the People’s Bank of China has already announced a 50 basis point cut to the reserve requirement ratio, signaling potential support for the market.
The recent Lunar New Year holiday and stock sell-offs have further complicated the situation. More than 85% of stocks in Hong Kong’s Hang Seng Index are trading below their 200-day moving average, indicating extreme market conditions that could lead to a strong reversal.
The current environment has led investors to shift away from high-risk products to low-risk options like fixed income. However, understanding the longer-term trend in data shows that China is entering a new phase of growth. This shift requires investors to look more closely at company competitiveness and individual returns.
In the midst of this uncertainty, Evercore ISI has identified potential opportunities in lesser-known Chinese companies such as Lufax, Li Auto, and Kanzhun, which are projected to have double-digit earnings growth this year and next. This contrasts with the expected single-digit increases in earnings for giants like Alibaba, Baidu, and JD.com.
As we navigate these uncertain times in the Chinese market, it’s important to remain informed and open to potential opportunities. While the near-term outlook may be volatile, there is potential for long-term growth in specific Chinese stocks. Keep an eye on the developments in Beijing and stay informed about the companies that could be the winners in this evolving market.
Source link