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China Traders Await Policy Signals to Boost Faltering Stocks

China Traders Await Policy Signals to Boost Faltering Stocks

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China’s renewable energy, defense and technology sectors are likely to offer investor opportunities as the nation’s top political meeting starts this week, which could help inject fresh impetus into the country’s sagging equities.

Measures to help achieve President Xi Jinping’s pledge of a carbon neutral economy by 2060 could be released at the meeting which begins Friday, according to brokerages including Guotai Junan Securities Co. Plans for an expanded defense budget are also likely to be published at the National People’s Congress, Tianfeng Securities Co. analysts said.

Also topping analysts’ watch lists are policies to drive China’s economic growth in the post-pandemic era. Approval of a five-year plan, which includes strategies to cut dependence on the West for crucial components like computer chips and make bets on emerging technologies such as hydrogen vehicles, is expected. Beijing has repeatedly signaled a desire to reduce reliance on exports and expand domestic consumption under its “dual circulation” mantra.

Such plans could help arrest recent equity declines amid investor concerns about high valuations and official warnings about bubble risks. The CSI 300 Index has lost about 7% since hitting its highest level since 2007 in February, one of the worst performers in Asia Pacific during the period. Stocks were higher on Wednesday, led by gains in financial and energy-related shares as investors rotate into cyclical shares ahead of the NPC.

“New policy directions from the meeting may provide fresh points of focus for the market, boosting sentiment,” wrote Essence Securities Co. analyst Chen Guo in a Monday note. “Historically A shares had solid performance” during and in the week after the NPC, Chen added. Read More…

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Anand Gupta Editor - EQ Int'l Media Network