A rapid reopening, pent-up consumer demand and other tailwinds are expected to drive Chinese equities higher, said Citi investment strategist Ken Peng who noted that the current market rebound is still in its early stages.
Citi joins the chorus of China bulls viewing the reopening with great optimism and forecasting strong upside in its equity markets which were undergoing a 20-month rout before recovering since October 2022.
«The rebound in markets that we've gotten so far is still very early stage,» said Ken Peng, head of Asia investment strategy at Citi Global Wealth Investments (CGWI), at a recent briefing attended by finews.asia.
Reopening Winners, Production Facilitators
In the short term, Citi favors Chinese equities that are beneficiaries of the reopening such as consumer, e-commerce, pharma and medical tech.
In the longer term, the bank expects a drive toward building more domestic production capacity which will favor industries like sustainable energy, telecom, core technologies and select infrastructure.
Domestic Demand
According to Peng, China’s reopening is being met with significantly pent-up demand, including 13.3 trillion yuan ($854 billion) amassed by domestic households in the first nine months of 2022.
«That’s roughly 15 percent of GDP and […] that’s roughly five to seven times the total amount of money that Chinese outbound tourists spent in 2018,» Peng explained.
Asia Growth
In addition to its own equity markets and economy – Citi forecasts 4.5 percent GDP growth for the mainland in 2023 – China’s reopening is expected to benefit the broader region in Asia. The bank expects emerging market Asian real GDP to bounce back from 4 percent in 2022 to 5 percent this year as Chinese consumers fuel growth in various areas.
«The progress in Asian tourism and consumption is going to make big leaps because of China's reopening,» Peng said.
