16 Dec 2021

(Yicai Global) Dec. 16 — The CSI 300 Index, which measures the performance of the top 300 stocks traded on the Shanghai and Shenzhen stock exchanges, could leap 18 percent next year to set a new record, US investment bank J.P. Morgan Chase’s chief China equity strategist said recently.

The index is likely to hit 5,950 next year, beating the previous all-time high of 5,931 set in February, Liu Mingdi said. Today it closed at 5,034.

“If 2021 was the year when a set of new industrial regulations were drawn up in China, next year is the year to implement them,” Liu said. “People’s faith in the market is expected to improve with the revised policies and simpler loan procedures.”

Emerging sectors such as new energy vehicles, renewable energies, fifth generation mobile networks, semiconductors and green industries are likely to be the new drivers of growth, she said, adding that New York-based J.P. Morgan regards them as ‘Overweight’ or a ‘Buy.’ In particular, the photovoltaic industrial chain, including solar auxiliaries and wind farms are good picks.

Internet-based firms, a sector that is currently being overhauled by regulators, have been restored to Overweight after a period of being Underweight, she said. But it is better for individual investors to pay attention to industries that have good growth potential.

‘Old heroes’ such as property are now ‘Underweight,’ meaning not an attractive investment. Limits on local government leveraging and the new property tax will all take their toll and there is little room for a rebound, she said. We are looking in particular at their debt risk and leadership ability, she added.

“J.P. Morgan recommends IT, renewable energies and discretionary consumables as Overweight, regular fuels and materials as Equal Weight and essential consumption, telecoms and healthcare as Underweight. For the latter category, we prefer companies with overseas revenue,” Liu said.

Editor: Kim Taylor