China
stocks
have
staged
such
a
strong
rally
after
a
protracted
slump
for
the
past
few
years
that
they’re
beating
even
the
S
&
P
500
so
far
this
year.
The
MSCI
China
index,
which
includes
the
mainland
A-shares,
Hong
Kong-listed
shares
and
U.S.-listed
China
names,
has
jumped
around
9%,
while
the
KraneShares
CSI
China
Internet
ETF
is
up
around
13%.
The
S
&
P
500
has
risen
around
8%.
That
breakout
has
come
after
a
deep
and
lengthy
decline
in
Chinese
markets,
as
they
lost
nearly
$5
trillion
in
three
years
.
Investors
were
bearish
as
a
result
of
the
property
debt
crisis,
slowing
growth
and
other
factors.
But
is
the
bounce
back
sustainable?
Here’s
what
Wall
Street
and
other
analysts
say,
and
what
to
buy
in
the
market.
China
policy
a
big
factor
Bernstein
said
in
a
May
3
note:
“Chinese
market
has
seen
one
of
the
most
silent
bull
[cycles];
MSCI
China
up
19%
since
Jan
bottom
despite
skeptical
investors.
With
rebounding
strength
in
recent
weeks,
many
investors
question
if
this
rally
can
continue
or
is
it
already
time
to
take
profit.”
It
believes
there’s
“more
room”
for
the
China
rebound
—
largely
through
growth
stocks.
But
it
also
advised
that
hedging
through
momentum
—
selectively
—
is
important.
The
momentum
strategy
is
one
in
which
investors
buy
stocks
that
are
rising
but
sell
when
they
appear
to
have
hit
the
peak.
Most
analysts
said
whether
the
rally
can
be
sustained
will
largely
depend
on
China
policy.
In
a
May
3
note,
BNP
Paribas
said
it’s
increasing
its
MSCI
China
target
“to
the
bullish
scenario”
to
have
another
10%
to
15%
upside.
It
cited
the
April
statement
by
China’s
Politburo
—
the
gathering
of
top
Chinese
leaders
—
that
focused
on
a
stronger
commitment
to
pro-growth
and
pro-reform
policy.
“We
see
the
current
uneven
recovery
broadening
to
benefit
capable
leaders
across
sectors
that
have
yet
to
participate
or
fully
participate
in
the
ongoing
rally,”
said
JPMorgan
in
a
May
3
note,
adding
that
a
segment
of
property
buyers
who
wish
to
upgrade
will
lend
support
to
this
sector
till
2026
to
2027.
Goldman
Sachs
said
in
an
April
23
note
that
its
analysis
suggested
that
China’s
A-shares
could
jump
around
20%
—
if
China
can
“narrow
the
gap”
with
the
international
average
in
terms
of
shareholder
returns,
corporate
government
standards
and
institutional
investor
ownership.
The
Wall
Street
bank
also
cited
the
Asian
giant’s
policy
focus
in
2024,
which
has
shifted
to
a
focus
on
promoting
high-quality
development
of
its
markets.
“More
direct
and
to-the-point
fiscal
stimulus
measures
targeting
the
demand
side
are
key
in
keeping
the
rally
going
forward,”
Kevin
Liu
of
CICC
Research
told
CNBC
last
week.
Risk
factors
to
consider
include
when
policies
will
be
rolled
out,
and
how
quickly
the
economy,
property
sector
and
earnings
can
recover,
according
to
Nomura’s
May
5
report.
Still,
the
bank
believes
that
the
Politburo
event
is
“clearly
positive”
for
stocks.
“We
think
underweight
investors
are
likely
to
be
forced
to
chase
the
rally,”
the
bank’s
analysts
said,
adding
that
beaten-down
cyclical
recovery
stocks
are
likely
to
outperform.
How
to
play
China
Though
most
were
bullish
on
China
stocks,
they
would
be
selective
in
stock-picking.
Goldman
built
a
screen
of
what
it
called
“large-cap
stable
growers”
that
included
these
characteristics:
High
historical
earnings
growth
rates
but
low
realized
earnings
growth
volatility.
A
healthy
balance
sheet
—
defined
by
a
low
net-debt-to-equity
ratio.
A
track
record
of
returning
cash
to
shareholders.
The
stocks
with
market
capitalizations
of
more
than
$10
billion
that
showed
up
included:
BYD,
SAIC
Motor
,
Changan
Automobile
,
Longi
Green
Energy
and
Anhui
Conch
Cement
.
JPMorgan
named
14
stock
picks
from
a
few
main
themes,
including
“high
yielders”
(utilities)
and
growth
picks
(artificial
intelligence
and
electric
vehicle
batteries).
There
are
also
names
that
can
benefit
from
improving
housing
transactions,
broadening
economic
activities
(advertising
and
trucking)
and
consumption
(liquor,
smartphones).
The
bank
described
them
as
“well
positioned
to
catch
up,”
and
they
include:
Kweichow
Moutai,
CATL,
Kuaishou
Technology
,
Ping
An
Insurance
,
China
Merchants
Bank
and
JD.com
.
Of
the
list,
JPMorgan
gave
Ping
An
the
highest
potential
upside
to
the
price
target
of
77
Hong
Kong
dollars
($9.85)
—
at
102.6%
as
of
May
3.
U.S.
and
other
investors
who
wish
to
invest
in
China
via
exchange-traded
funds
can
consider
the
following,
which
Morningstar
gave
ratings
of
bronze
to
gold
and
overall
fund
ratings
of
three
to
five
stars.
They
include:
SPDR
S
&
P
China
ETF
iShares
MSCI
China
A
ETF
Global
X
MSCI
China
Consumer
Disc
ETF
iShares
MSCI
Hong
Kong
ETF
—
CNBC’s
Michael
Bloom
contributed
to
this
report.
