Photo credit: www.cnbc.com
Investors are intently scrutinizing stock price fluctuations in exchange halls as 2024 progresses, with particular focus on China’s economic landscape.
The nation is facing persistent challenges, often referred to as the lingering effects of “long Covid” on its economy. The repercussions of extensive lockdowns beginning in 2020 are still evident, with a slowing GDP, a struggling stock market, and elevated unemployment rates hampering notions of a swift recovery following the pandemic.
Despite these difficulties, not all analysts resonate with a pessimistic outlook.
“The sentiment surrounding China is overwhelmingly negative. I am skeptical about any further significant downturn given the innovative potential still present within the country,” stated Ted Alexander, Chief Investment Officer of BML Funds, during an interview on CNBC’s “Street Signs Asia” last week. “Investors would do well to maintain some exposure to China,” he added.
Wall Street shifts to a favorable stance
High-profile investors like David Tepper of Appaloosa Management and Michael Burry, known for his role in the “Big Short,” have recently reaffirmed their commitments to investments in China.
According to latest 13F filings, Tepper continues to regard Alibaba as his primary investment, even after scaling back his stake by 7% in the second quarter. Alibaba constitutes approximately 12% of Appaloosa’s $6.2 billion portfolio. Furthermore, Tepper has also increased his investments in firms like JD.com, KE Holdings, and two Chinese exchange-traded funds, which now represent 26% of his stock portfolio.
Burry is making similar strategic investments, adding Alibaba to his portfolio in the second quarter, where it commands an $11.2 million position, making it his largest holding. Other Chinese tech stocks, including Baidu and JD.com, are also part of his investment strategy.
Additionally, BCA Research has moved to an overweight position on Chinese equities, with strategist Jing Sima predicting that these stocks will likely outperform global markets passively.
Moreover, veteran investor George Boubouras, managing director of research at K2 Asset Management, is currently optimistic about China. He shared with CNBC his strategic approach to investing in emerging markets via exposure to companies that benefit from China’s demand while operating in developed economies.
However, not everyone on Wall Street shares this optimistic outlook. Goldman Sachs recently exited its long-term copper position and revised its 2025 price forecast downwards by nearly $5,000 per metric ton, attributing this to dwindling demand from China. This bearish sentiment is echoed by Bank of America, which has lowered its growth projections for China to 4.8% for the year.
Mixed signals in economic data
On a more positive note, China’s retail sales have shown encouraging signs, climbing by 2.7% in July compared to the previous year, according to the National Bureau of Statistics. This marks 18 consecutive months of growth in retail trade.
Surge in summer travel
Interestingly, despite the economic concerns, the tourism sector in China has recorded a significant uptick this summer. The Transportation Ministry reported approximately 872 million passenger journeys during this period, reflecting a 6.2% increase from the last year.
Looking ahead, projections indicate that air travel in China could reach record levels in 2024, exceeding the 619.6 million air passengers recorded in 2023. The Civil Aviation Administration forecasts that passenger flights may reach 700 million this year, driven by factors such as the upcoming Lunar New Year holidays, the Paris Olympic Games, and increasing demand for flights to Japan, South Korea, Singapore, and Europe, according to Song Zhiyong, head of the administration.
In a broader context, Eric Lin, head of Greater China Research at UBS, remarked that, in spite of macroeconomic worries, “Chinese corporates have demonstrated robust earnings this year.” This performance is seen as supportive of Chinese stocks, at least for the near term, with Lin’s team projecting a 10% upside to its MSCI China price target for the remainder of 2024.
Source
www.cnbc.com