Stormy Weather for Chinese Shares
In the dynamic world of Chinese equities, several significant developments have taken shape over the past year. Here's a rundown of some key areas that have drawn attention.
Chinese internet platforms, including food delivery, online finance, and education sectors, are currently under regulatory scrutiny. This regulatory focus is expected to cause short-term volatility for many companies, but the long-term outlook remains positive. Large providers like Alibaba, Tencent, and Meituan have pledged to increase investments to demonstrate good behaviour, which may impact their profits in the short term.
The Chinese government has set an ambitious goal to increase the share of electric vehicles (EVs) in total new car sales from 5.2 percent in 2019 to 20 percent by 2025. This shift presents opportunities for several listed Chinese EV manufacturers, including startups like Xpeng. In September 2020, President Xi Jinping announced China's commitment to reaching the peak of emissions before 2030 and achieving carbon neutrality by 2060.
China is one of the world's largest importers of raw materials, and strong demand has driven up global commodity prices. However, the Chinese government has taken steps to reduce imported inflation by strengthening the renminbi against the US dollar.
The renewable energy sector is another area of interest for investors. China, with its global market share of around 70% in the production of solar modules, offers opportunities in this growth strategy. Companies like China Longyuan Power and LONGi Green Energy Technology are involved in the production of wind and solar parks, and solar modules, respectively.
The sports industry is another sector that could benefit from China's growing consumer market. Anta Sports, a Chinese company, is expected to gain from the shift in consumer preference towards domestic brands and the attention on sports events.
Authorities are also focused on limiting monopolies among these platforms, which have benefited from the crisis but are now facing increased competition. This move is aimed at promoting fair competition and preventing excessive credit growth, a concern for the Chinese government.
While Alastair Campbell of Aegon Asset Management did not provide specific insights about Chinese stocks in 2021, general expectations were that sectors such as technology, consumer discretionary, healthcare, and industrials would continue to perform well due to China's ongoing economic recovery, technology innovation, and growing consumer market. For precise insights attributed to Alastair Campbell about Chinese stocks in 2021, it is recommended to consult investment reports or interviews published by Aegon Asset Management from that period.
Lastly, it is worth noting that China's economic growth may have peaked in Q1 2021, signalling a potential shift in investment strategies as the year progresses.
Other sectors that may attract finance are the renewable energy industry and the sports industry. China Longyuan Power and LONGi Green Energy Technology are companies involved in the production of wind and solar power, respectively, within the renewable energy sector. Anta Sports, a Chinese company, is expected to gain from the shift in consumer preference towards domestic brands and the attention on sports events within the sports industry.
