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In 2024, China’s economy is anticipated to witness favorable conditions and greater opportunities as compared to the challenges that persist in the world’s second-largest economy, according to the country’s’ official state news agency, Xinhua, as quoted on Reuters.
While quoting the office of the Central Financial and Economic Affairs Commission, according to the state media, low prices in China along with moderate central government debt levels and suitable conditions place the country in a strong position to implement monetary and fiscal policies.
However, there are still bottlenecks in the domestic economic cycle due to low company investment, consumption and demand.
Accelerating Fiscal Revenue
According to an article by Reuters, fiscal revenues of the country witnessed an increase of 4.3% year on year in the month of November. In the first 11 months of 2023, fiscal revenue registered a surge of 7.9% from a year earlier compared to growth of 8.1% witnessed in the first 10 months.
Per Goldman Sachs, as quoted on Reuters, the country’s fiscal policy will play a significant role in supporting the estimated growth in 2024. China intends to execute structural reductions in taxes and fees while initiating a fresh series of fiscal and tax reforms.
Optimistic Economic Data
China’s industrial production increased by 6.6% in November from a year earlier, marking the swiftest acceleration in this sector over the past two years, according to the country’s National Bureau of Statistics, as quoted on CNBC. November’s numbers for the industrial output surpassed estimates of 5.6% by Reuters and a 4.6% surge in October.
Over the first 11 months, infrastructure and manufacturing investments recorded year-on-year increases of 5.8% and 6.3%, respectively. Retail sales also surged 7.2% in the country during the same period, registering a surge of 10.1% in the month of November alone.
However, recovery post-Covid has been disappointing in the country due to an ongoing real estate crisis, looming debt risks, and persistent youth unemployment.
Bullish Analyst Estimates
According to Reuters, Morgan Stanley and Goldman Sachs estimate Chinese equities to surpass the S&P 500.
Analysts of Goldman Sachs expect CIS300, which tracks the performance of the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange, to reach a level of 4,200, surging by a remarkable 27% from the current level. The bullish outlook of the index is backed by Morgan Stanley analysts, who are estimating a target of 3,850 for the index at the end of 2024.
According to Reuters, Invesco remains “overweight” on Chinese equities within its Asian portfolios. Driven by appreciating yuan and cheap valuations, Jefferies turned “tactically positive” on China.
IMF also revised its 2023 and 2024 growth forecast for the country upward, driven by Beijing’s announcement of issuing about $139 billion in sovereign bonds (1 trillion yuan) in a bid to support the economy. According to the World Economic Forum, the IMF expects China’s GDP to grow by 5.4% this year, up from its previous estimate of 5% and by 4.6% in 2024, an increase from the previously estimated 4.2%.
Asian Development Bank (ADB) followed suit, citing China’s economic recovery as one of the driving forces behind developing Asia’s growth estimates. According to Reuters, ADB increased its growth projections for the world’s second-largest economy to 5.2% for 2023, up from the previously forecasted 4.9%. The ADB upheld its growth forecast for China at 4.5% for 2024.
Robust Earnings Growth in 2024
LSEG analysts estimate Chinese companies will experience their most robust earnings growth in seven years in 2024, according to Reuters, fueled by government interventions aimed at boosting consumer demand and addressing challenges within the housing market.
ETFs in Focus
Estimates of China’s economic recovery next year remain optimistic, even as the country faces challenges in the near term. A struggling real estate market, an aging population, and a complex geopolitical landscape are some headwinds.
However, investors can increase their exposure in China ETFs given the increasing probability of an economic resurgence in 2024 and baring the country’s long-term growth prospects.
iShares MSCI China ETF seeks to track the performance of the MSCI China Index with a basket of 660 securities. The fund has gathered an asset base of $6.27 billion and charges an annual fee of 0.58%.
iShares China Large-Cap ETF seeks to track the performance of the FTSE China 50 Index with a basket of 50 securities. The fund has amassed an asset base of $4.44 billion and charges an annual fee of 0.74%.
SPDR S&P China ETF seeks to track the performance of the S&P China BMI Index with a basket of 3,282 securities. The fund has gathered an asset base of $717.9 million and charges an annual fee of 0.59%.
KraneShares CSI China Internet ETF seeks to track the performance of the CSI Overseas China Internet Index with a basket of 34 securities. The fund has gathered an asset base of $5.61 billion and charges an annual fee of 0.69%.
KraneShares MSCI All China Health Care Index ETF (KURE - Free Report)
Increasing exposure in the country’s defensive sectors can also prove to be beneficial. KraneShares MSCI All China Health Care Index ETF seeks to track the performance of the MSCI China All Shares Health Care 10/40 Index, which is designed to track the equity market performance of Chinese companies engaged in the health care sector.
KraneShares MSCI All China Health Care Index ETF has gathered an asset base of $59.4 million and charges an annual fee of 0.65%.
Investors can also look at Global X MSCI China Consumer Discretionary ETF (CHIQ - Free Report) , as the country’s consumer discretionary sector is estimated to surge by around 20%, according to Reuters.
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ETFs to Tap China's Economic Resurgence in 2024
In 2024, China’s economy is anticipated to witness favorable conditions and greater opportunities as compared to the challenges that persist in the world’s second-largest economy, according to the country’s’ official state news agency, Xinhua, as quoted on Reuters.
While quoting the office of the Central Financial and Economic Affairs Commission, according to the state media, low prices in China along with moderate central government debt levels and suitable conditions place the country in a strong position to implement monetary and fiscal policies.
However, there are still bottlenecks in the domestic economic cycle due to low company investment, consumption and demand.
Accelerating Fiscal Revenue
According to an article by Reuters, fiscal revenues of the country witnessed an increase of 4.3% year on year in the month of November. In the first 11 months of 2023, fiscal revenue registered a surge of 7.9% from a year earlier compared to growth of 8.1% witnessed in the first 10 months.
Per Goldman Sachs, as quoted on Reuters, the country’s fiscal policy will play a significant role in supporting the estimated growth in 2024. China intends to execute structural reductions in taxes and fees while initiating a fresh series of fiscal and tax reforms.
Optimistic Economic Data
China’s industrial production increased by 6.6% in November from a year earlier, marking the swiftest acceleration in this sector over the past two years, according to the country’s National Bureau of Statistics, as quoted on CNBC. November’s numbers for the industrial output surpassed estimates of 5.6% by Reuters and a 4.6% surge in October.
Over the first 11 months, infrastructure and manufacturing investments recorded year-on-year increases of 5.8% and 6.3%, respectively. Retail sales also surged 7.2% in the country during the same period, registering a surge of 10.1% in the month of November alone.
However, recovery post-Covid has been disappointing in the country due to an ongoing real estate crisis, looming debt risks, and persistent youth unemployment.
Bullish Analyst Estimates
According to Reuters, Morgan Stanley and Goldman Sachs estimate Chinese equities to surpass the S&P 500.
Analysts of Goldman Sachs expect CIS300, which tracks the performance of the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange, to reach a level of 4,200, surging by a remarkable 27% from the current level. The bullish outlook of the index is backed by Morgan Stanley analysts, who are estimating a target of 3,850 for the index at the end of 2024.
According to Reuters, Invesco remains “overweight” on Chinese equities within its Asian portfolios. Driven by appreciating yuan and cheap valuations, Jefferies turned “tactically positive” on China.
IMF also revised its 2023 and 2024 growth forecast for the country upward, driven by Beijing’s announcement of issuing about $139 billion in sovereign bonds (1 trillion yuan) in a bid to support the economy. According to the World Economic Forum, the IMF expects China’s GDP to grow by 5.4% this year, up from its previous estimate of 5% and by 4.6% in 2024, an increase from the previously estimated 4.2%.
Asian Development Bank (ADB) followed suit, citing China’s economic recovery as one of the driving forces behind developing Asia’s growth estimates. According to Reuters, ADB increased its growth projections for the world’s second-largest economy to 5.2% for 2023, up from the previously forecasted 4.9%. The ADB upheld its growth forecast for China at 4.5% for 2024.
Robust Earnings Growth in 2024
LSEG analysts estimate Chinese companies will experience their most robust earnings growth in seven years in 2024, according to Reuters, fueled by government interventions aimed at boosting consumer demand and addressing challenges within the housing market.
ETFs in Focus
Estimates of China’s economic recovery next year remain optimistic, even as the country faces challenges in the near term. A struggling real estate market, an aging population, and a complex geopolitical landscape are some headwinds.
However, investors can increase their exposure in China ETFs given the increasing probability of an economic resurgence in 2024 and baring the country’s long-term growth prospects.
iShares MSCI China ETF (MCHI - Free Report)
iShares MSCI China ETF seeks to track the performance of the MSCI China Index with a basket of 660 securities. The fund has gathered an asset base of $6.27 billion and charges an annual fee of 0.58%.
iShares China Large-Cap ETF (FXI - Free Report)
iShares China Large-Cap ETF seeks to track the performance of the FTSE China 50 Index with a basket of 50 securities. The fund has amassed an asset base of $4.44 billion and charges an annual fee of 0.74%.
SPDR S&P China ETF (GXC - Free Report)
SPDR S&P China ETF seeks to track the performance of the S&P China BMI Index with a basket of 3,282 securities. The fund has gathered an asset base of $717.9 million and charges an annual fee of 0.59%.
KraneShares CSI China Internet ETF (KWEB - Free Report)
KraneShares CSI China Internet ETF seeks to track the performance of the CSI Overseas China Internet Index with a basket of 34 securities. The fund has gathered an asset base of $5.61 billion and charges an annual fee of 0.69%.
KraneShares MSCI All China Health Care Index ETF (KURE - Free Report)
Increasing exposure in the country’s defensive sectors can also prove to be beneficial. KraneShares MSCI All China Health Care Index ETF seeks to track the performance of the MSCI China All Shares Health Care 10/40 Index, which is designed to track the equity market performance of Chinese companies engaged in the health care sector.
KraneShares MSCI All China Health Care Index ETF has gathered an asset base of $59.4 million and charges an annual fee of 0.65%.
Investors can also look at Global X MSCI China Consumer Discretionary ETF (CHIQ - Free Report) , as the country’s consumer discretionary sector is estimated to surge by around 20%, according to Reuters.