(Bloomberg) -- China’s stock market suffers from a lack of positive drivers as the new year begins, and Beijing’s support efforts are likely to keep falling flat amid persistent risks.
Those are the key takeaways from an informal survey of 23 mostly mainland-based analysts and money managers by Bloomberg News. Geopolitical tensions, China deflation and a possible US recession are seen as the greatest threats, while potential positives include bargain hunting after the prolonged selloff and an end to the foreign-investor exodus.
The benchmark CSI 300 Index is trading near a five-year low as concerns about the Chinese economy fail to dissipate. Monetary policy easing, cash injections and government buying of stocks have done little to fuel a rebound as investors eye a host of problems including an aging population and worries that the property market no longer offers growth.
“Measures to boost stocks are aimed at curing the symptoms not the disease — we hope that authorities may find the resolve to tackle underlying issues in the economy,” said Yu Yingbo, investment director at Shenzhen Qianhai United Fortune Fund Management Co. He added, however, that opportunities outweigh risks at current market levels.
One potential tailwind cited by most of the survey respondents is a likely end to foreign avoidance of Chinese equities. After 2023 witnessed the smallest inflow since the stock connect program with Hong Kong started in 2016, lower global interest rates and improving risk-reward are seen luring foreign investors back to A-shares.
“I don’t think there’s any offshore money to be sold anymore, nearly everything has been sold,” said Hayden Briscoe, APAC head of multi-asset portfolio management at UBS Asset Management, on the sidelines of the bank’s Greater China Conference in Shanghai. “China looks extremely cheap relative to the rest of Asia.”
The CSI 300 may end the first quarter at 3,500 points according to the median of 16 estimates in the informal poll, implying a gain of 6.3% from Tuesday’s close. The survey target for end-2024 indicates a 21% advance, which would be the first annual gain since 2020.
The Hang Seng Index is projected to rise 10% as of end-March and 32% for the full year, which would end its four-year losing streak. Survey respondents were evenly split on whether it’s a good idea to buy Hong Kong stocks right now.
Opinions were similarly divided on whether or not the worst is over for China’s property sector, one of the primary factors behind the nation’s continued economic malaise. Willer Chen, an analyst at Forsyth Barr Asia Ltd., sees no solution for the real estate sector near term, adding that “macro recovery is still a big question mark here.”
“The number of defaults will definitely go down in 2024,” based purely on the fact that there are “not many major private developers left,” according to Chen. Resolving the crisis will take a long time, he said.
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