Mainland stocks will increase with greater amplitude in H2 2021, experts say

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Mainland Chinese markets extended their 2020 rally into the first half of this year, but in a more moderate range, amid a robust economic rebound that has boosted global capital markets. Experts were optimistic that the markets would rise even more in the second half of this year.

They also predicted that China’s stock valuation could one day overtake that of US stock markets, after the two countries’ economic gap narrows further.

The prediction comes at a time when markets in both countries rebounded in 2021. The United States closed the first half of 2021 at record highs, with the three major US indices all rising by double-digit percentages. The Nasdaq market is up more than 12% in the six months, while the S&P 500 is up 14.4% from the end of last year.

The continental market rally was more subdued, by comparison, although it also extended a rise from last year through 2021. On Friday, the Shanghai Composite Index stood at 3,519 points, up 3.4% from the start of the year. The Shenzhen Component Index rose 4.78% to 14,670 points.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, said that due to the US Federal Reserve’s unprecedented loose monetary policies and active fiscal policies, US markets have been more buoyant than most stock markets. global, including the A- share markets. However, the spread between the A-share markets and the US markets could narrow over the next six months.

“The continued progress of the pandemic, the skyrocketing performance of listed companies on the mainland, as well as the growing inflow of capital into the mainland markets will all support a stock rally that may last longer,” Li said. to the Global Times.

He also said the A-share markets are expected to rise by a wider range in the second half of 2021 compared to the first, given that the markets have already undergone relatively large corrections around May of this year.

Experts said that with China’s strong economic rebound, it is possible that China’s market capitalization will exceed that of US markets at some point in the future.

Currently, the market capitalization of mainland markets reached about 86 trillion yuan ($ 13.3 trillion) at the end of June, compared to about $ 45 trillion in US markets.

“Now there are obstacles to this goal such as the level of internationalization and the GDP gap between the two countries, but I would say that could happen someday,” Li said.

He also noted that the boom in US stock markets was generated as part of abnormal monetary policies and the risks could erupt once the Fed recovers from such policies.

“This could generate economic sequelae which may take more than 10 years to dissolve, but the risks in the stock markets will not necessarily erupt in a short period,” he said.

China has already passed the United States in some economic indicators. For example, China overtook the United States to become the largest recipient of FDI in 2020, according to data released by the United Nations Conference on Trade and Development (UNCTAD).

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