JPMorgan is ‘positive’ on China stocks and ‘constructive’ on real estate as Beijing props up markets

JPMorgan is “positive” on China stocks and “constructive” on its real estate sector as the world’s second-largest economy strives to prop up its equity and property markets.

JPMorgan’s view on China stocks is “tilted in the positive direction,” said Wendy Liu, the firm’s chief Asia and China equity strategist.

Speaking to CNBC’s Sri Jegarajah at the JPMorgan Global China summit, Liu said that while she expects the recent sharp rally in Chinese stocks to pause in the short term, she was confident that earnings will improve in 2024 compared to 2023.

“Earnings drive share performance. And investors when they see earnings growth, they’ll be interested.”

China’s CSI300 equity benchmark hit an eight-month high on Monday, and is up 4.97% so far this year at 3,601.48. Liu, who expects the index to hit 3,900 by the end of the year, said that China market was still “among the cheapest” in Asia Pacific.

The country’s stock markets have been underperforming in recent years. Mainland China’s CSI300 was the third worst performing stock market in Asia, losing 11.38% last year. It also clocked losses in 2022 and 2021.

Hong Kong’s Hang Seng index recorded its fourth straight year of declines in 2023, losing 14% last year.

Chinese authorities have strived to prop up the country’s equities through measures aimed at increasing market liquidity, as well as issuing warnings against malpractices.

Liu is optimistic about China’s market reform after new chairman Wu Qing was appointed as the head of the China Securities Regulatory Commission, saying that the CSRC had introduced supply side reforms.

Under Wu, the CSRC has established tighter rules for the listing and delisting of companies, as well as issuing warnings to firms with insufficient dividend policies.

The measures make it easier for firm’s be penalized for violations or if there are problems with their financial reporting.

When asked about the Chinese real estate sector, Liu said it was at an “inflection point,” and that JPMorgan was “constructive” on the sector.

Last week, Chinese authorities pledged new support for state-owned enterprises to enable them to buy unsold apartments.

This included a provision of 300 billion yuan ($42.25 billion) from the People’s Bank of China to financial institutions to lend to local state-owned enterprises (SOEs) so they can buy unsold apartments that have already been built.