A shares tipped to return to bull orbit this year
Bullishness will return to the Chinese mainland bourses in a gradual manner this year after the current fluctuations end and domestic companies start exhibiting more competitiveness in the global market, experts said.
The comments came after key indexes continued their gains on Monday. The benchmark Shanghai Composite Index rose 0.78 percent to 3517.62 points on Monday while the Shenzhen Component Index gained 1.74 percent to 14,456.54 points. The technology-focused ChiNext at the Shenzhen bourse rose 2.6 percent to 3112.74 points.
Home appliance companies were the biggest gainers on Monday with an average daily surge of 3.52 percent, followed by listed medical companies at 3.18 percent.
Xu Chi, a strategist at Zhongtai Securities, said the brokerage maintains a positive outlook on the A-share market's performance in the second quarter. Blue-chip companies with low market valuation, especially financial companies, are good investment targets, he said.
Yan Xiang, a strategist at Guosen Securities, expects the A-share market to see a rally for the second time this year in the second quarter. Though most of the major global indexes slumped last week, the A-share market was an exception with its strong performance. After a three-month adjustment, the A-share market has become more resilient with market confidence further consolidating, said experts.
Structurally, A-share companies that enjoy a competitive edge in the global market should be the long-term investment targets, as their performance will not be affected by inflation or changes in liquidity, said Yan. The A-share market has matured enough for a slow bull market. Rising demand amid the global economic recovery will present several opportunities for Chinese companies, he said.
Nonferrous metal providers along with energy and chemical companies having global pricing power may also show strong growth momentum in the second quarter. Given the fact that initial public offerings have slowed down this year, certain companies in the CSI 500 index－it monitors the performance of A-share small to mid-cap companies－may see their share prices increase in the next few months, said Xu.
Experts from China International Capital Corp Ltd said that the A-share market has approached an end of the midterm adjustment, taking into consideration the major indexes' fluctuation rates, trading volume, market valuations, adjustment time span and the market sentiment. Investors should not hold a pessimistic view on the market performance, they said.
Cyclical industries have also seen noticeable surges over the past few months. In light of policy uncertainties, the market may not provide demand which is strong enough to support further increases in cyclical industries. On the other hand, growth enterprises which have undergone adjustment in the previous months, may once again gain the attention of investors, said CICC analysts.
Experts from China Merchants Securities said in a note that it is quite difficult to invest in the A-share market this year, mainly due to the frequently changing conditions. There is not a single market style or investment theme that has sustained for months.
Throughout the rounds of adjustment, the main theme this year is still the rapid growth of businesses. Companies which can promise growth in the mid to long-term are still the ground rule of investment. But for this year, sectors or companies that can grow at a faster pace may be the right targets, according to China Merchants Securities analysts.