Investing.com -- According to HSBC analysts, China stocks still have the potential for a 7-10% upside by the end of 2024, driven by new policy tools and fiscal support from the People's Bank of China (PBoC).
The PBoC's recent measures, including setting up swap facilities for securities brokers, mutual funds, and insurance companies, are designed to boost liquidity in the market.
"These new policy tools could support a market rebound towards the end of the year," HSBC said.
In addition, the central bank's special relending program is said to enable commercial banks to provide loans for share buybacks, which could further lift stock prices.
The HSBC analysts note that China's recent Politburo meeting stressed the importance of supporting growth through countercyclical fiscal and monetary policies.
These policies aim to stabilize the housing market, boost the capital market, and promote private sector growth. HSBC sees this as a "decisive turn in policy direction," signaling stronger government support for the stock market.
While HSBC trimmed its end-2024 target for the Shenzhen Composite (SZCOMP) by 7% to 9,800, the targets for the Shanghai Composite (SHCOMP) and CSI 300 remain unchanged, implying a potential upside of 7-10%.
Despite the sluggish economy, HSBC remains optimistic about China's equity market, especially with the anticipated Federal Reserve rate cuts.
The analysts project that a Fed cut cycle, barring a US recession, could see China equities rise by as much as 25%, with growth stocks outperforming value stocks.
HSBC also highlighted ten stocks across five investment themes, including Roborock, Mindray, BYD (SZ:002594), and Xiaomi (OTC:XIACF), which are well-positioned to benefit from China's growth policies and global expansion.