Attractive valuations with structural opportunities
China’s GDP growth slowed to 4% year-on-year in the fourth quarter of 2021, bringing the full-year growth to 8.1%, higher than market expectation and government target of “above 6%”.
China's GDP growth yoy1
Looking ahead, China’s growth is expected to normalize in 2022, however still outpacing that of other major economies, while the valuation of China equity is currently at significant discounts to global equities, we believe the risk is on the upside at current PE levels.
Global GDP growth forecast (%)2
China’s valuation and earnings growth vs Global Markets3
US Fed began to tighten its monetary policy with tapering started in November last year, only to double the pace in the following month. In contrast, China is ready for more accommodating monetary policy to support growth, with a Required Reserve Ratio (RRR) cut in early December, followed by policy rate reduction, which is supportive for China equity.
China & US 10 years government bond yield (%)4
China aims for CO2 emissions peak by 2030 and carbon neutrality by 20605. The time between China’s carbon peak and carbon neutrality is only 30 years, potential investment over the next 30 years may reach USD 20 trillion6. Electric vehicle (EV) and renewable energy supply chain are major beneficiaries of sustainability initiatives.
Time interval from carbon peak to carbon neutral7 in year
1. National Bureau of Statistics in China, Bloomberg. As of 17 January 2022.
2. IMF, World Economic Outlook, October 2021.
3. Bloomberg, as of 31 December 2021. Measured by MSCI indices for World and China, S&P 500 for US.
4. Bloomberg, as of 7 January 2022.
5. United Nations General Assembly, 22 September 2020.
6. Credit Suisse, as of October 2021.
7. China Institute of Energy economics research, Macquarie Research, as of October 2021.
The above information may contain projections or other forward-looking statements regarding future events, targets, management discipline or other expectations. There is no assurance that such events will occur, and the future course may be significantly different from that shown here.