Now that China’s key ministers have spoken out about the stimulus package, analysts have narrowed down the stocks that could benefit. Recent gains in Chinese stocks have slowed as investors await more policy details. Data released on Friday showed that retail sales and industrial production exceeded expectations in September, while the housing market’s decline remained evident. GDP growth in the third quarter was 4.6%, slightly better than expected. “Overall, year-to-date GDP growth is 4.8%, slightly below the government’s 5.0% growth target,” David Chao, Invesco’s global market strategist for Asia Pacific ex-Japan, said in a note on Friday. “But Given the recently announced stimulus measures,” he said. “I believe growth may accelerate in the fourth quarter, which may push full-year growth above 5.0% in 2024.” In addition to interest rate cuts, China’s most effective stimulus policies include subsidies to stimulate consumption through trade-in programs, and incremental real estate market support. The central bank on Friday further detailed its new plan to provide funds to companies to buy shares. Morgan Stanley analysts said in an Oct. 14 note that the stock support program could benefit some companies more than others. They screened mainland-listed stocks with relatively high dividend yields and strong cash flows. Analysts look from the pool for stocks that trade at least 20% higher than Hong Kong-listed stocks and have an implied upside of at least 10% from Morgan Stanley’s price target. The four stocks that meet the screening criteria to increase their holdings are: PetroChina, Weichai Power, Aluminum Company and Anhui Conch Cement. 1857-SZ YTD Shan 2024 PetroChina China’s Housing and Urban-Rural Development Minister Ni Hong said on Thursday that Beijing will speed up financial support to complete qualified, unfinished real estate projects that have been sold. He is the latest senior official to hold a news conference, following the central bank governor in late September, the economic planner on October 8 and the finance minister on October 12. There would be an immediate boost to sales, but it could help boost confidence, said Edward Chan, director at S&P Global Ratings. His team estimates that property sales in China will decline this year and next, to less than half of their 2021 peak, before stabilizing in the second half of 2025. Construction software company Glodon is expected to benefit from the stable property market by listing in Shenzhen. Analysts at HSBC said in an Oct. 14 report that Sangfor, an enterprise cloud company also listed in Shenzhen, gets 90% of its revenue from small businesses and local governments, making it a “major beneficiary” of the Ministry of Finance’s plan to support local governments. Analysts said: “Market focus may shift from policy to fundamentals, and market dynamics will shift from beta rebound to stock selection.” As for the beneficiaries of China’s consumption stimulus measures, HSBC analysts believe that Hong Kong-listed consumer electronics companies Xiaomi and Shanghai Listed robot vacuum cleaner company Roborock Sweeping Robot, etc. Retail sales grew 3.2% in September, exceeding expectations. When introducing the impact of the national trade-in policy, the National Bureau of Statistics said that sales of home appliances surged by more than 30% in September, and furniture sales turned positive. Even e-commerce giant Alibaba has benefited greatly. The company said government subsidies and platform discounts drove home appliance pre-sales to surge more than sevenfold in the first hour of the annual Double Eleven shopping festival on October 14, 10 days earlier than last year. This holiday originated on November 11th.
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