Translated by Andrew Vanburen from a Chinese-language piece by Victory Securities in Sinafinance
CHINA'S GDP is expected to expand at around 8.3% this year, slightly slower than last year’s pace but still the envy of much of the world.
Therefore, it may be the right timing to put our money where the government’s mouth is: consumer stocks.
After all, isn't it time for the domestic market to start showing its mettle?
In fact, buying of counters with exposure to the consumer sector is likely to be one of several driving forces for the benchmark Hang Seng Index going forward.
But in the meantime, various factors have been impacting Hong Kong shares of late.
Led by recent rallies in New York, shares in Hong Kong began the morning session strong on Wednesday.
But as the trading day wore on, the selloffs in shares in Shanghai and Shenzhen helped drag the Hang Seng lower, finishing down 0.15% on the day.
Trading turnover rose a whopping 34% from the previous day to 80.5 bln hkd, with Chinese resource-themed stocks one of the biggest downside drivers.
Global stock markets have been stuck in the pattern of late wherein bourses in Asia and Europe tend to trend with the most recent close in New York, no matter what.
And on the PRC side, resource-based counters reacted to the recent announcement by the country’s energy department that January-February electricity usage rose 6.7% year-on-year.
Meanwhile, Chinese Premier Wen Jiabao emphasized that housing prices had “still not returned to reasonable pricing levels.”
He said that therefore the current restrictions to combat speculation in the sector would not be relaxed anytime soon.
In addition, the Commerce Department said it would enhance measures to promote and protect the investments of Chinese companies overseas, a policy announcement that provided a broad boost across a wide range of industries.
The People’s Bank of China, the country’s Central Bank, said it would push for every domestic financial institution to offer similar preferential terms for their issuance of mortgages to first-time homeowners, a move which helped stabilize some volatility among developer-related shares.
Overseas, retail sales figures in the US surprised somewhat on the upside.
Meanwhile, the European debt crisis continued apace, with a bit of an upside occurring after Fitch raising Greece’s sovereign debt rating to B- after its richer neighbors worked together to help pull the southern European state from the brink of bankruptcy.
Therefore, reasonably strong sales in the US and healthy GDP estimates from Germany and France – the EUs two biggest national economies – point toward the wisdom of boosting portfolios with counters exposed to the consumer sector.
This is especially true for Hong Kong shares where nearly all the consumer-based shares have a heavy reliance on the 1.3 billion consumer strong PRC economy.
With the Mainland Chinese economy still expected to grow at a very respectable 8.3% this year and the government continuously calling for a shift away from overreliance on external demand and a more concerted effort to tap the domestic market, the elements are in place this year to make investing in the Chinese shopper a difficult argument to ignore.
This will also help end the cycle of following the lead of market closing levels overseas to help guide the direction of trade each morning in Hong Kong.
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