As odds of strong China stimulus fade, semiconductor and advanced manufacturing stocks to benefit from policy pivot: Saxo Markets
- China has not followed through with the highly anticipated policy measures after the Politburo meeting last month
- As chances of a strong stimulus decrease, investors should focus on industries seen benefiting from the policy shift to achieve high-quality growth, Saxo strategist says
Investors betting on massive stimulus from Chinese policymakers should instead focus on semiconductor and advanced manufacturing companies that match the nation’s goal to achieve high-quality growth and close the tech gap with global leaders, according to Saxo Markets.
China’s emphasis on technology, innovation and stability over short-term growth means that the odds of a potent stimulus package, like the 4 trillion yuan (US$555 billion) bailout during the 2008 global financial crisis, are decreasing, said Redmond Wong, a Hong Kong-based strategist at Saxo Markets, in a research note on Tuesday.
Such a backdrop offers investors opportunities arising from tech self-sufficiency, agricultural modernisation and economic development that focus on domestic demand and supply-side reforms, he said.
“Instead of waiting for an elusive massive stimulus package and bailing out of the property sector reminiscent of the mythical Godot, investors could probably put their capital to work in industries positioned to benefit from the high-quality development policy and the quest for technological innovation,” said Wong.
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The call may shed some light on how investors should ride out the skittish sentiment in onshore markets that has been swayed by hopes of measures to support growth and fears that policy loosening will fall short of expectations.
The Hang Seng Index has fallen more than 4 per cent this month, giving up most of the 6.2 per cent gain in July, as investors fret over the lack of follow-through measures after a Politburo meeting chaired by Party chief Xi Jinping in late July signalled policy easing of the property market.