How Australian investors can invest in Chinese assets amid China's 'moderately loose' monetary policy?

The meeting proposed an even more proactive fiscal policy than the moderately enhanced proactive fiscal policy put forward at the 2023 Politburo meeting, indicating a higher stance and greater intensity. This suggests that, based on the introduction of "incremental fiscal policies, there is considerable room for anticipation regarding the intensity of fiscal policy in 2025, particularly in terms of the scale and ratio of the deficit.

The monetary policy statement is the most straightforward. Following the 2008 financial tsunami, the Political Bureau of the CPC Central Committee announced the promotion of a "moderately loose" monetary policy, which was then changed to prudent in 2010. Now, after a 14-year interval, the policy has shifted back to a moderately loose monetary policy.

China is Australia's largest trading partner, with its construction, manufacturing, and energy sectors being the main buyers of Australian minerals. Reports show that in 2023, China purchased a total of AUD 219 billion worth of Australian export products, accounting for 32.5% of Australia's total exports. Iron ore alone made up 18% of Australia's export total, while the export value of lithium products reached AUD 21 billion.

China's stimulus policies may lead to an increase in the import of Australian mineral raw materials, causing iron ore prices to rise and altering the current oversupply situation faced by Australian mining stocks, thereby driving mining stocks higher. China's economic activities have a significant impact on Australia's mining and energy markets, and as the Chinese economy gradually recovers, Australia's mining and energy sectors may gain new growth opportunities.

The Chinese policy meeting has set a tone that exceeds expectations, which will shift the market's current outlook on Chinese assets from a "short-term pessimistic, mid-term neutral" stance to a "short-term better-than-expected, mid-term marginally improving" perspective. The upward trend in the market is expected to continue through the end of the month, with another round of speculative anticipation leading up to the National People's Congress in March. During this period, close attention should be paid to the specific operations of China's monetary policy.

Australian investors can also choose to invest in relevant Chinese ETFs and Chinese securities listed in the US. Short-term favorable sectors include: financial sector (securities firms, insurance, banking), consumer goods (automotive, home appliances, retail), technology innovation (semiconductors, AI, robotics), and real estate & infrastructure (developers, upstream materials, construction engineering).

Source: Moomoo, Bloomberg