(Bloomberg) -- China’s annual economic summit for its leaders may offer guidance for traders deciding on their 2022 stock strategies, after Beijing indicated growth is a top priority with a tilt toward easing this week.
The economy is facing pressure from a deepening property market slowdown and weak domestic demand amid stringent virus controls. The central bank announced this week a cut in the reserve requirement ratio for most banks, while party leaders have vowed to meet reasonable housing needs.
Investors are keen to see if more measures will be fleshed out at the Central Economic Work Conference, shedding light on sectors that may win Beijing’s favor next year.
“The CEWC will include more detail on work plans for next year, and I’m looking for what other polices could be introduced to keep economic growth within reasonable range, under the current pressures,” said Wang Chen, a Shanghai-based partner of XuFunds Investment Management Co. He added that it is more likely for credit supply to be greater than liquidity getting looser.
Here’s what other market watchers are saying:
Morgan Stanley (analysts including Robin Xing)
- The CEWC will likely set the growth target for gross domestic product next year at 5%-6%, compared with market expectations of less than 5%, before an official announcement at the National People’s Congress in March
- “Past experiences suggest that Beijing would strive to beat the growth target in a year of political reshuffle”
- Meeting may guide for more countercyclical policies including for housing finances, a corporate tax cut, green infrastructure, and pro-consumption measures
- Those measures, combined with monetary easing, could drive a “meaningful” rebound in credit impulse from the first quarter, lifting GDP growth to 5.5% next year
Guosheng Securities (Xiong Yuan, analyst)
- Stability is the key, with GDP growth target expected to be set at 5%-5.5% for next year and actual expansion rate to come in at around 5.5%
- Pay attention to CEWC’s wording on carbon emissions, such as caution against one-off, campaign-like programs, measures to stimulate consumption, plans for both new and old infrastructure projects, and whether more differentiated local policies for the property market will be allowed
Jiming Capital Co. (Ou Xiao, fund manager)
- The policy stance on property will likely put a floor on the slowdown rather than stimulating the market
- Any stimulus would be for areas that can help achieve China’s carbon neutral goals as it “is impossible to revert to the old path” of boosting the economy
- Major opportunities would still lie in the semiconductor, military and renewable energy sectors that will underpin “high-quality growth” that the authorities desire
Societe Generale SA (Wei Yao, economist)
- The statement from a Politburo meeting earlier this week sounded “decidedly more dovish” and “gave a clue as to what to expect” from the upcoming CEWC
- Stabilizing growth is now given higher priority and policy makers do not want to over-tighten the property sector
- Expects another 50 basis point RRR cut and a 10 basis point policy rate reduction in the first half of 2022
- Fiscal policy could be focused on technology and green infrastructure; could see tax and fee cuts for the manufacturing industry and smaller firms, as well as social welfare spending and consumption stimulus
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