Many are starting to wonder if Chinese stocks can continue the growing trend that began at the end of 2022. Despite the recent correction, some analysts are still positive.
The Chinese stock market during the month of February presented a completely discordant trend compared to November 2022. Although 2023 started particularly well , this month the China50 index shows a negative trend of around 5%. The dismal results achieved by the Chinese stock index come in response to the country’s terrible reaction to the easing of restrictions from Covid-19. The rise in infections continued to limit Chinese activity, thereby narrowing the prospects for economic growth. In addition, the growing geopolitical tensions fueled a climate of distrust towards foreign investors, negatively impacting equity valuations.
MSCI China: expert opinion
Similarly, some analysts from reputable investment banks continue to see a substantial investment opportunity in the Chinese stock market. This is the case of Goldman Sachs Group, which updates the target price for the MSCI China index to 85 points by the end of 2023, approximately 24% away from the today’s prices. Indeed, according to their analysts, the Chinese stock market will gradually move towards a recovery which should lead to growth in earnings and presumably in exchange multiples. For this reason, the investment bank suggests carefully monitoring the macro statistics for January-February and the quarterly earnings of Chinese companies. In their opinion, the boost to growth should come from an increase in consumption.
China A50: technical analysis on the index
Although the China50 index has maintained an overall upward trend since November 2022, the underlying trend has remained bearish since the highs of February 2021. The trend is well delineated by a trendline that it combines the decreasing maximum points from the beginning of 2021 until July 2022. The trendline was violated with the stroke of 2023 together with the restart of almost all of the global stock exchanges indicating a clear bullish signal. Currently, the price seems to be heading towards the pullback zone, probably due to the recent geopolitical and macroeconomic turmoil. In fact, technical analysts are right to think that the price of the index can continue its climb upwards in the medium term: an important confirmation comes from the RSI indicator at 14 periods on the weekly timeframe, which seems to have strongly exceeded its midpoint, positioned on 50 points suggesting a possible continuation of the growing trend. In the same way it must be considered that these forecasts could be totally distorted by a worsening of the geopolitical tensions between East and West.
Original article published on Money.it Italy 2023-02-22 15:14:00. Original title: I titoli cinesi possono ancora crescere? L’opinione degli esperti
