Chinese Stock Market Set for Expansion with Sweeping Reforms
Valuations for Chinese A shares could expand by up to 40% as the country’s stock market aligns with global leaders in corporate governance, dividend payouts, and institutional ownership. These are some of the major reforms outlined by the Chinese government to support the US$9 trillion stock market.
MSCI China Index Upgraded
UBS has upgraded its rating on the MSCI China Index and Hong Kong stocks to overweight due to earnings resilience and policy support. The index has shown strength in the current economic environment. The consensus earnings per share for the index companies have only declined by 2% over the past 18 months. According to UBS, the largest stocks in the index have performed well in terms of earnings and fundamentals.
Key Market Indicators
Despite the overall positive outlook, the CSI 300 Index, which tracks the performance of the largest 300 companies in China, has risen only 2.2% this year. However, it has recovered from losses after a series of market rescue measures by the government, including state buying and restrictions on short selling.
Positive Signs for Hong Kong Stocks
UBS has also raised its rating on Hong Kong stocks, citing rising dividend support and potential benefits from increased tourism. Last year, the Swiss bank had downgraded Chinese stocks to neutral. The latest upgrade reflects a more positive view on the earnings outlook, fueled by early signs of a recovery in consumer spending.
