Week 34 Equity Strategy by Paul Chew #shorts #DMN
· 21.08.2023 · 01:55:28 ··· ··· Monday ·· 1 (1)
PYTCH Media Week 34 equity strategy: Amidst the prevailing pessimism, we are hopeful about China. The macro data is not great but it is far from catastrophic. Indicators such as retail sales, fixed asset investment, property and loans are all slipping. Private sector and consumer sentiment is poor and perhaps pulling back on expectations of government stimulus, especially for larger ticket purchases such as property and cars. Amidst these dim signals, steel production, electricity consumption and online spending continue to grow at a healthy clip. Steel production was up 11% YoY in July. The weaker renminbi is helping steel exports reach their highest in 7 years. Online goods and services climbed 11% and 31%, respectively, in July. And China is still easing monetary policy contrary to many other countries. We think China possesses the fiscal levers to stimulate the economy. Government debt to GDP is 21% with domestic savings at 45%. In comparison, advanced economies are 115% and 18%, respectively. The issue is timing. The new government line-up was only installed in March and the sharper downward spiral in the economy largely occurred in June. The government recently reaffirmed that the 2023 GDP target of 5% is not optional. The epicentre of any stimulus will be the property sector and local government balance sheets. Possible support could be subsidies to incentivise home buyers to debt swap with the local government entities. Sentiment is poor but we are not yet at the lows experienced in October 2022 when the Hang Seng China Enterprises Index touched a low of 5028, or 18% below current levels. A recovering China benefits a slew of Singapore large caps we cover including CapitaLand Investment, DBS, OCBC, Keppel Corp, ComfortDelGro, HRnet, Raffles Medical and Sasseur REIT.
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