Stocks of consumption, new energy firms may shine as mood buoyant on recovery

Chinese stocks are clearly in a bull market thanks to the ongoing economic recovery and buoyant investor mood, and A-share indexes' positive show on Monday, when trading resumed after the weeklong Spring Festival holiday, is the latest sign of the uptrend, experts said.

The benchmark Shanghai Composite Index climbed 0.14 percent to close at 3269.32 points while the Shenzhen Component Index gained 0.98 percent to close at 12097.76 points. The technology-focused ChiNext in Shenzhen also closed 1.08 percent higher.

"Latest data showed the number of travelers during the Spring Festival holiday recovered to 89 percent of the pre-COVID level. This seems to suggest the impact of the pandemic on the economy, society and markets has been largely mitigated," said Qiu Xiang, co-chief strategist of CITIC Securities. The outstanding performance of the Hong Kong market over the past week has indicated investors' stronger confidence in China's economic recovery, he said.

The Hang Seng Tech Index, where a large number of Chinese mainland technology companies are listed, surged 5.35 percent when it traded on Jan 26 and 27 during the Spring Festival holiday.

An overall A-share market recovery can be predicted given the current level of adequate liquidity, said Qiu. Industries showing faster growth rates, including healthcare and digital economy, will be more highly pursued by investors, he said.

Offshore China assets rallied from Jan 23 to Jan 27, a period when A-share trading was suspended for the Spring Festival holiday.

The Nasdaq Golden Dragon China Index, a tracker of US-listed Chinese companies, jumped 4.79 percent during the period. The main contracts of FTSE China A50 index futures, which track the Shanghai and Shenzhen listed companies, reported price gains for five consecutive days during the period and rose nearly 3 percent in all.

Yang Delong, chief economist of First Seafront Fund, said the noticeable rises in China assets in overseas markets during the Spring Festival holiday show high probability of a bullish A-share market after the holiday.

Some market observers expressed a view that the A-share market's spring rally appears to have started at the beginning of the year, thanks to the central regulators' resolve to stabilize market confidence and China's on-track economic recovery. The upward momentum is expected to carry on in the following months, with consumption, new energy and technology companies leading the market rebound, Yang said.

Foreign institutions are positive about the A-share market's future performance. The northbound capital, the amount that foreign investors pump into A shares via the stock connect program linking the Shanghai, Shenzhen and Hong Kong exchanges, reported a net inflow of 20 billion yuan ($3 billion) on Monday, taking the overall figure for the year so far to over 132 billion yuan.

Analysts from Goldman Sachs said they hold an optimistic attitude toward the A-share market performance after Spring Festival. In a report released on Jan 27, they said that seasonal reasons, supportive policies and companies' improving profitability will all help drive up the indexes.

The US investment bank has also upgraded its China stock targets for a third time in two months. It raised its year-end target for the MSCI China Index to 85 from 80 and that for the CSI 300 Index to 4,800 from 4,500.

While valuations of Chinese equities have sharply rebounded since November, they remain relatively neutral, said Julien Holtz, emerging markets strategist at Pictet Wealth Management, a Swiss firm. "We therefore see room for further expansion, if not an overshoot."