Chinese stocks to stagnate in second half on lack of catalysts, top brokerages say
A deflationary trend and sluggish earnings growth will continue to weigh on
yuan-denominated stocks , but
state intervention and an economic recovery – albeit weak – will put a floor under the market, according to GF Securities, Industrial Securities and Shenwan Hongyuan Group.
China's benchmark CSI 300 Index barely budged in the first half, as investors waited for more policy signals from Beijing to bolster growth and watched the trade talks with the US for positive signs. Meanwhile, the economic recovery was uneven, with retail sales rebounding on a trade-in programme for household appliances, exports holding up on front-loading, and woes lingering in the property market. The yield on the 10-year government bond fell to a record low of 1.597 per cent in January on expectations of interest-rate cuts by the central bank.
'While borrowing costs are falling and liquidity is ample, whether it can trigger a valuation expansion still depends on the fundamentals,' said Liu Chenming, an analyst at GF Securities in
Beijing . 'For now, stocks are fairly valued.'
The caution contrasts with global investment banks' relatively
upbeat views on
Hong Kong stocks , which they said would benefit from interest-rate reductions by the Federal Reserve and a reallocation of capital seeking to diversify away from US assets. The
Hang Seng Index rose 20 per cent in the first half.
GF Securities, Industrial Securities and Shenwan Hongyuan were ranked among mainland China's top four brokerages in the equity strategy category by New Fortune magazine last year.
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