Goldman Sachs Sees Opportunity for Chinese Stocks' Tactical Rally

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Bloomberg Feb 19 01:16 · 19.4k Views

Timothy Moe, chief Asia Pacific regional equity strategist at Goldman Sachs, shares his views on Chinese stocks and the economy. He speaks on "Bloomberg Daybreak: Asia."

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Transcript

  • 00:00 Going into
  • 00:01 the side of trading in the year of the Dragon and things probably look as as, as good as we could expect to given the way that the last year
  • 00:08 ended.
  • 00:09 But do you think the positive carry through from things like the spending
  • 00:12 data is going to be enough to to really kind of change the trajectory of how investors feel about Chinese risk assets?
  • 00:21 So good morning Heidi and and and Annabelle great to be on.
  • 00:24 So quick answer is just going to take more than just a couple of data points to change
  • 00:28 investors perceptions about China.
  • 00:30 We're
  • 00:31 sadly just celebrated
  • 00:33 yesterday
  • 00:34 Sunday, the three-year anniversary of the start
  • 00:36 well the top of the bull market and start of the bear market.
  • 00:39 So
  • 00:40 there have been a number of different rallies
  • 00:43 off the bottom
  • 00:44 in respective cases during
  • 00:46 those that three-year.
  • 00:47 And all those have been met with selling and a move to lower lows.
  • 00:50 So I think it's going to take something to to break that investor psychology.
  • 00:54 On the brighter side, I think there's there's clearly opportunity for a tactical rally
  • 00:58 that made.
  • 00:59 I think it's the easier call to make than to
  • 01:01 than to say that we're having a structural, A structural turn in things.
  • 01:05 Number one, we're quietly 10% off the bottom
  • 01:08 by the way even even to the close before
  • 01:11 during during Chinese New Year
  • 01:13 #2, as you said, we've got good data which has come out
  • 01:16 for the,
  • 01:17 for the, for, for, for for the break.
  • 01:19 We had total person trips up 34% year on year.
  • 01:22 We had spending up about 47%
  • 01:24 year on year
  • 01:25 and I think that's going to give us a decent lift
  • 01:27 start and and some catch up
  • 01:29 perhaps by the A shares
  • 01:31 valuations are 8.5 times forward earnings.
  • 01:33 So that that certainly seems to be
  • 01:35 inexpensive.
  • 01:36 So I think if we can have some improvement in the shorter term data momentum, we can see a continuation of this rally.
  • 01:42 But I think we would need to see greater policy support in order to start to change investors perception about the longer term structural
  • 01:49 dynamics
  • 01:51 in.
  • 01:52 In the meantime, where do you view the opportunities?
  • 01:54 Do you kind of look at that potential for more wealth creation and an uplift in
  • 01:58 household sentiment that we might see in some of the public holiday spending figures or
  • 02:03 are you still kind of
  • 02:04 looking at following what the national team might be investing in?
  • 02:09 I guess a bit of both.
  • 02:10 I mean, tactically, there's certainly a Pierce opportunity in some of the consumer areas.
  • 02:14 And our analysts are just out with some reports
  • 02:16 just this morning, in fact, highlighting some opportunities there in different parts of the economy, certainly, which are
  • 02:22 a beneficiary of some of those service oriented areas,
  • 02:25 including hotels and other beneficiaries of of travel.
  • 02:29 So that'd be 1
  • 02:30 area.
  • 02:30 More broadly and strategically, we continue to really lean into the theme of China rebalancing.
  • 02:35 And that's kind of a catch all for the need to shift the economy away from reliance on property and debt fueled infrastructure investment
  • 02:42 and more towards areas that are structurally more beneficial which would be higher technology investment, the the renewable and green economy, mass consumption,
  • 02:51 the reform of SO
  • 02:53 ES and also companies that are very competitive domestically which have the opportunity to go out the so-called going global theme.
  • 02:58 So kind of like both of those areas
  • 03:01 tactically I think the area
  • 03:03 that the market will focus on will be the recovery in, during, in in travel from during the
  • 03:09 Lunar New Year.
  • 03:10 But the longer term strategic opportunities are the ones that I just mentioned.