Toyota’s revenue and earrings are…
A significant development this week…
China has set a 5% growth target, which is in line with market expectations following last week's blowout PMI. While some may view the goal as conservative, it leaves room for upside growth surprises and bodes well for Chinese equities overall. However, Hong Kong stocks are expected to continue outperforming their onshore peers.
The 5% target is below the 5.3% consensus in a Bloomberg survey and the 5.5% objective for 2022, as well as targets set by most provinces. Despite this, Citigroup notes that China grew 8.1% in 2021 versus a 6% target.
During the ongoing Congress in Beijing, it has become clear that there will be no major stimulus on either fiscal or monetary fronts. The strength of China's reopening exceeded top leaders' expectations, causing them to be more restrained in rolling out new stimulus measures.
Citigroup believes that any positive data surprises may limit the extent of downward moves in market interest rates now that the 5% target is in place.
Hong Kong has been home to the reopening of trade for investors who believe that the post-Covid economies are already doing well. Onshore equities are the stimulus play for those who expect Beijing to deliver more fiscal spending or PBOC liquidity. Since October, Hong Kong's Hang Seng China Enterprise Index has climbed over 40%, while the onshore benchmark CSI 300 advanced less than half of that.
According to a March 6 research report from Morgan Stanley, China's reopening is likely to be more V-shaped than consensus expectations with substantial excess savings supporting consumption. The report also expects North Asia ex-Japan equities to continually outperform, as is typical in the early phases of a bull market.
By Michael Kern for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,