MNI INTERVIEW2: China Support To Drive 2-3-Yr Rise In Equities
MNI (BEIJING) - Measures by China’s authorities to support the stock market and the broader economy should drive equity prices higher over the next two to three years, as domestic institutional investors pivot away from low-yielding bonds and from property markets and as overseas buyers reassess valuations of Chinese assets, a senior government advisor told MNI.
Policymakers are aiming for a steady increase in stock prices rather than a rapid surge, said Yang Chengzhang, a member of the CPPCC National Committee, China’s top advisory body, in an interview.
The annual Two Sessions policy-setting meeting has added equity market stability to the People’s Bank of China’s mandate and Yang pointed to other supports including a regulatory move to extend the benchmark period for calculating returns on investments by national social security funds and state-owned insurance firms to over three years. (See MNI: PBOC To Buoy Assets, As Stocks, Property Added To Mandate)
The recent rally in China’s tech stocks, fueled by optimism surrounding DeepSeek’s AI, should continue to attract foreign funds, Yang said.
"Hong Kong stocks are anticipated to lead the way, given their accessibility to foreign investors, with a rebound in A-shares to follow, in line with the gradual recovery of the domestic economy," said Yang, also chief economist at Shenwan Hongyuan Securities.
AI and other digital technology companies which are a key investor focus are already boosting efficiency and driving down costs, contributing to the country’s recent low inflation, he said. “Falling prices lately does not exactly mean insufficient money supply or weakened economic momentum,” he added.
TECH LISTINGS
The benchmark Shanghai Composite Index, stuck in a narrow range around 3,000 points for a decade, is an inadequate gauge of the attractiveness of the Chinese equity market, which has reconfigured around newer growth areas, most recently around high tech, said Yang.
"The index has struggled to reflect the rapidly evolving market structure, with the driving force shifting from real-estate developers and financial institutions to the energy and consumer goods sectors in recent years," he said.
Yang said authorities should encourage the return of overseas-listed Chinese internet and tech giants to the A-share market, with a view to developing a Chinese AI-orientated equivalent of the 'Seven Sisters' group of leading U.S. tech stocks. This will require regulatory changes to make listing in China more attractive for these firms, he said.
China’s very large economy offers ample room for developing AI applications, while its political system allows for quick regulatory change to facilitate the widespread adoption of new technologies, said Yang, who downplayed concerns that official support could drive overcapacity. (See MNI INTERVIEW: PBOC To Spur Bond Issuance By Tech Startups)
“The U.S. and EU are more focused on upstream computing power and models, where the risk of excess supply is greater," he said.