On May 17, 2024, a real estate construction site in Wanxiang City, Huai’an City, Jiangsu Province.
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JPMorgan is “optimistic” on China’s stock market and “constructive” on its real estate sector as the world’s second-largest economy struggles to shore up its stock and real estate markets.
Wendy Liu, JPMorgan’s chief Asia and China equity strategist, said the firm’s view on Chinese stocks is “leaning in a positive direction.”
Liu said in an interview with CNBC reporter Sri Jegarajah at the J.P. Morgan Global China Summit that although she expects China’s stock market to rise sharply in the near future, In the short term, she is confident that 2024 earnings will improve compared to 2023.
“Earnings drive stock performance. When investors see earnings growth, they’re interested.”
China’s CSI 300 index hit an eight-month high on Monday and has risen 4.97% so far this year to 3,601.48 points. Liu expects the index to hit 3,900 points by the end of the year, saying the Chinese market remains “one of the cheapest” in the Asia-Pacific region.
The country’s stock market has performed poorly in recent years. Mainland China’s CSI 300 index is Asia’s third-worst performing stock market, down 11.38% last year. The company also posted losses in 2022 and 2021.
Hong Kong’s Hang Seng Index 2023 marked the fourth consecutive year of decline, with a 14% decline last year.
Chinese authorities have been working to shore up the stock market through measures to increase market liquidity and issue warnings about misconduct.
After new chairman Wu Qing took over as chairman of the China Securities Regulatory Commission, Liu was optimistic about China’s market reforms, saying the China Securities Regulatory Commission had launched supply-side reforms.
Under Wu, the China Securities Regulatory Commission instituted stricter rules for company listings and delistings and issued warnings against companies with inadequate dividend policies.
These measures make companies more vulnerable to penalties for noncompliance or questionable financial reporting.
When asked about China’s real estate industry, Liu said it was currently at an “inflection point” and JPMorgan had a “constructive” attitude toward the industry.
Last week, Chinese authorities promised new support for state-owned enterprises to buy unsold apartments.
These include the People’s Bank of China providing 300 billion yuan ($42.25 billion) in loans to financial institutions to local state-owned enterprises (SOEs) so that they can purchase completed and unsold apartments.
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