China’s reopening after weeks of big-city lockdowns is “enticing” investors, according to HSBC , while Goldman Sachs has named a raft of stocks it says are at attractive valuations. Both Shanghai and Beijing have started to relax their Covid restrictions after weeks of strict lockdowns. This opening-up — combined with soaring government investment and plummeting stock valuations — are creating investment opportunities, the banks say. In a research note dated June 8, Goldman Sachs named stocks to trade a “turbulent” Asian market, identifying several names set to benefit from government investment. In April, China’s President Xi Jinping called for an “all-out” effort to construct infrastructure such as roads, rail and waterways. In its “Select China ‘New Infra'” basket of stocks, Goldman named smartphone maker Xiaomi and software firm Chinasoft International . It also chose solar firm Xinyi Solar , acoustics company AAC and telco giant China Telecom . “Stocks with exposure to the environmental theme or in the China ‘new infra’ industries can benefit from the global climate change initiative and Chinese govt. support on emerging industries & technologies,” the analysts, led by Alvin So, wrote. Meanwhile, Goldman’s “Environmental & Renewables” basket of stocks included wind power company China Longyuan Power , lithium producer Ganfeng Lithium , utilities company Beijing Enterprises Water and Canadian Solar , a renewables firm that operates in mainland China and trades on the Nasdaq. It also named energy investment company China Everbright . “The valuations of both baskets have de-rated meaningfully over the past year, which we believe has created attractive entry points,” the analysts added. HSBC’s stock picks “Driven by an “all-out” infrastructure push and the return of investment led growth, China reopening is an emerging theme enticing global investors,” HSBC’s analysts, led by Amit Shrivastava, wrote in a research note on June 9. HSBC focused on global stocks with positive exposure to China, picking 22 names including consumer goods company Reckitt Benckiser , chocolate-maker Lindt & Spruengli , engineering company Kone and pharmaceuticals firm Novo Nordisk . Computer hardware firm Logitech and heating equipment company Belimo are also picks for the bank. All of the stocks have “relatively high and positive sensitivity to [the] Chinese business environment and a history of outperformance when mainland China business sentiment is improving,” the analysts said. HSBC described market sentiment towards Chinese stocks as “above average,” and moving towards the long-term mean. – CNBC’s Evelyn Cheng contributed to this report.
Heavy traffic in Shanghai, China, on June 8, 2022, as people returned to work after Covid lockdowns.
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