(Bloomberg) – China will gradually reopen after the lockdown due to Covid Zero and the country’s real estate sector will recover slowly with policy support, helping to boost the country’s benchmark stock index. The country will grow 13% over the next 12 months, according to Hao Hong, chief economist at GROW Investment Group.
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Stocks in Hong Kong could rise as much as 28% next year, Hong said in Monday’s report titled “Outlook 2023: Cyclical Recovery”.
Hong writes: The Shanghai Composite could trade between 3,000 and 3,500 during that time period. The Hang Seng Index is most likely to jump to around 23,000, he said, while 15,000 is considered the low point of the current cycle.
Hong’s comments echo those on Wall Street, with banks including Morgan Stanley and JPMorgan Chase & Co. recently raised their target on Chinese stock measures. Among the factors driving the price uptrend: easing of rigid Covid controls, increased liquidity for the nation’s struggling real estate sector and the possibility of improving relations with the US .
“The issue is not whether China will reopen, but the question of how long and how best to manage it to minimize health care costs and who can,” he said. die”.
Hong’s base scenario is that China gradually reopens after Covid Zero at 80% odds, the country’s real estate market recovers slowly, with similar odds, and the US economy slows down. Period in 2023. Stock returns will be higher if any of these go better than expected, he said.
“The risk, of course, is that China remains reclusive, assets continue to decline, and the US declines. “Such a triad would create a risk scenario similar to what we experienced in 2022 – no further explanation needed,” he wrote.
Read more: China’s first Covid death in months sparks fears of more restrictive measures
Hong also predicts that cyclical sectors, including industrials, materials, discretionary, real estate and information technology, could perform better.
Hong was a China strategist at Bocom International Holdings Co. before he resigned following negative reports about the country.
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