Chinese stocks have taken off after the government said it was going to splash about $114 billion (not million!) to revive its financial markets.
And though it might not be wise to try and catch a speeding Ferrari (or Chinese EV maker Nio’s EP9 supercar!), there are some corners of the market that still have lots of potential to provide returns.
China has been off its game for a while, with piecemeal stimulus failing to make a real impact over the past two years. But analysts think the latest spending bazooka could be a turning point. If the dragon is finally waking up, the recent gains might just be a start.
If there’s more upside to come, here’s how you could position yourself:
- Big internet names could be among the top winners – think Tencent, Alibaba or JD.com. The KraneShares CSI China Internet ETF, or KWEB, which includes these stocks, is already up more than 47% this year.
- UBS analysts say revenues in this space should get another boost if consumption turns around in China.
- Chinese consumers are known for their spending power, and if they start splurging again, Europe’s top luxury brands (Hermes, LVMH et al) could get a fresh boost. Some of these stocks have been under pressure from weak demand, meaning they’re trading at potentially attractive price points should that rebound happen.
- Avoid Australian miners. While these stocks typically benefit when China’s booming, a recent run-up in prices might have left them vulnerable to a pullback, analysts say.
What about oil, you ask? With geopolitical tensions rising in the Middle East and oil prices going up, a resurgence in Chinese demand would obviously add upward pressure. The United States Brent Oil Fund, which tracks Brent prices (the benchmark for Europe and the Middle East), is already up more than 10% in the past month.
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