Investing.com – Chinese stock markets remain poised for further gains after a stellar rally over the past two months, Alpine Macro analysts wrote in a note, citing improving economic conditions amid additional stimulus from Beijing.
Chinese stocks and indices have risen 16% to 18% from multi-year lows hit in February, with the recent gains also coming as the government rolled out its most targeted crackdown on the beleaguered property market.
Alpine Macro analysts said the recent rally was driven by an easing of negative expectations that had plagued Chinese markets at the start of 2024.
They said increased financial support from Beijing would help the economy reach the government’s target of 5% of annual gross domestic product this year.
Analysts noted that Chinese shares continue to trade at “extremely low multiples”, especially in contrast to their emerging market peers. This made them an attractive purchase in the prospect of improving economic conditions.
They also noted that overall participation in Chinese markets has increased and that short positions in local stocks are still in play.
Looser credit conditions in Chinese markets also pointed to more liquidity that could be channeled into equities.
China’s real estate sector in focus
Alpine Macro analysts said Beijing’s announcement to expand support for housing construction marked a sharp reversal in the country’s stance on the property downturn and reflected a “whatever it takes” attitude to contain further weakness in the sector.
Beijing recently loosened home-buying rules in several major cities and also directed state governments to start buying up some available inventory from developers.
A nearly four-year slump in the property market has become a key point of pressure on the Chinese economy, with the sector accounting for roughly a quarter of overall economic growth.
Alpine Macro analysts said they don’t see Chinese property stocks offering superior returns compared to other sectors, but they see relief for the housing market easing concerns about the broader economy.
“Beijing’s housing policy reversal will help reduce the financial burden on developers and set a floor on the prices of their assets. This will likely prevent them from being a source of negative surprises for Chinese equities,” analysts said in a note.
Alpine Macro analyst said they continue to favor fundamental indicators to drive broader market growth.