Analysts give China the thumbs up

Chinese stocks may be poised for a rebound over the next one to two months as the economic recovery picks up in the third quarter, according to analysts.

Analysts from JP Morgan believe companies most likely to lead the recovery will be those that benefit from fixed-asset investment. In particular, the analyst team likes the look of Changsha Zoomlion Heavy Industry Science & Technology Development, Weichai Power, China National Building Material,  and Anhui Conch Cement. The same team  predicts the economy may grow more than 8.5% in the third quarter, from 7.8% in the previous three months.

“The China market might have reached the maximum stress point. China’s sequential economic growth appears to have troughed in the second quarter.”

Other analysts are also predicting buying opportunities with Goldman Sachs expecting a short-term rebound for Chinese stocks. And Standard Chartered advising investors to be  “overweight” in Chinese equities over the coming three months as the government achieves a “soft-landing” for the economy. Nomura Holdings also sees equities offering “buying opportunities” in the second half of this year.

China has raised benchmark interest rates by 25 basis points which lifts the one-year deposit rate from 3.25% to 3.5% and the one-year lending rate from 6.31% to 6.56%. Swiss & Global Asset Management points out that this is the nation’s third rate hike this year amid efforts to fight the fast-growing economy’s accelerating inflation, which, it believes, is likely to climb above 6% in June, significantly above the inflation target of 4%. “This is a clear signal that the People’s Bank of China is not worried about a ‘hard landing’ in China and expects the economy to maintain its good momentum.”