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Can China stocks sustain comeback?

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​Stocks in China have staged a remarkable comeback so far this year and it’s likely there’s more upside to come, according to bullish predictions by the CEO of a leading financial advisory and fintech.

The MSCI China index, which includes the mainland shares, Hong Kong-listed shares and U.S.-listed China names, has gained around 9% this year – meaning it has outperformed Wall Street’s S&P 500, which has jumped around 8%.

“The rally is impressive, especially considering Chinese markets lost around $5 trln in three years, and we expect that there’s still more to come,” said Nigel Green of deVere Group.

“April’s statement issued by China’s Politburo underscores an unwavering commitment to implementing pro-growth and pro-reform policies.

“Such resolute dedication from the top echelons of power in Beijing is instilling confidence not only among domestic investors, but it also resonates positively with international markets, positioning China as an attractive destination for capital inflows.”

Green explained that central to this bullish outlook is the recognition of the uneven nature of the current recovery.

While sectors such as artificial intelligence (AI) and utilities have spearheaded the initial resurgence, the deVere boss expects that there is ample room for expansion across a broader spectrum of industries.

Confidence

“As confidence continues to gain traction, we anticipate a ripple effect that will pull more sectors, such as consumer goods, into the rally.”

The resurgence of AI and utilities sectors serves as a harbinger of the broader market potential awaiting exploration.

China’s robust investments in AI, underscored by ambitious national strategies, have positioned the nation as a global leader in this area, Green added.

As AI continues to permeate various facets of the economy, from manufacturing to healthcare, companies at the forefront of this revolution stand to reap substantial rewards, propelling the broader market forward.

Simultaneously, the utilities sector, buoyed by Beijing’s commitment to green energy initiatives.

With infrastructure investments poised to accelerate, driven by both government stimulus and private sector participation, the utilities sector is a pillar of the Chinese market resurgence.

The deVere CEO earlier said that he would suggest that investors should take a zoomed-out perspective on China if their primary objective is capital growth.

“China is transitioning from an export economy to one of consumption that, ultimately, will be more sustainable. Indeed, PwC forecasts that the country’s burgeoning middle class could create the largest consumption market – $6 trln – by 2030.

“As China moves up the value chain, it is directly acquiring more and more foreign brands, market networks and technologies that will further strengthen its position for global investors.

“In addition, there’s still enormous potential for growth, as its urbanisation strategy is still in its infancy and the scope is massive. Plus, the reform of state-owned companies could blow apart monopolies and create major investment opportunities,” Green concluded.

“Is the comeback of Chinese markets sustainable? Under current conditions, we expect there’s more space to be had on the upside.”