Investors in China's lagging markets to play defence in 2024
Investors in Chinese stocks next year will be seeking out businesses with global reach or other insulation from an economic downturn, after three straight years of China underperforming world markets.
Companies in defensive sectors such as health, medical innovation and exporters in the electric vehicles supply chain and advanced manufacturing, as well as multinationals such as e-commerce firm PDD Holdings, will top the list.
That's despite sell-side analysts turning bullish on China's broader market for next year, with Morgan Stanley and Goldman Sachs forecasting Chinese equities to outperform the S&P 500.
«Since economic recovery is slower than expected, we lowered exposures which are sensitive to macro cycles,» said Wang Qing, chairman at Shanghai Chongyang Investment Management.
Chongyang is instead buying defensive high-dividend stocks, medical innovators with global competitiveness, and advanced manufacturing backed by Beijing, Wang said, declining to list any investments by name.
This follows China's blue chip CSI300 index sinking to five-year lows and losing 12% over 2023 against a 15% gain for global stocks as the Chinese economy struggled with a property crunch and a slow recovery from COVID-19.
Hong Kong's Hang Seng fared even worse, sliding more than 18% to trade on a forward price-to-earnings ratio below six, against 21 for the S&P 500.
Performance over the last 10 months crushed the optimism that infused the beginning of the year, with four straight months of foreign outflows in the second half of the year totalling a net 138 billion yuan ($19 billion) withdrawn from Chinese equities via the Stock Connect scheme.
«Investors (have) struggled to think what the next growth driver for China will be,»
