Citigroup expects new consumer stocks to benefit from China's upcoming new five-year development plan while maintaining its forecasts for Hong Kong's stock market benchmark.
"As China is making its new five-year plan end in 2030, Beijing [is planning to] step up efforts in developing healthcare, technology research and development, talent cultivation, and culture and tourism", said Pierre Lau Hin-tat, China equity strategist and head of Asian utilities and clean energy research at Citigroup Global Markets.
Citi upgraded the rating for the consumer sector to“overweight”in its latest outlook, as it is primarily domestically driven and not greatly affected by global trade uncertainties.
The bank maintained an overweight rating for China's internet and technology sector. However, rising tariffs are expected to impact industrial companies, while the local property sector faces challenges from high new home inventory. Consequently, Citi has lowered its earnings growth projections for the Hang Seng Index by 0.4 percentage points to 4.6 percent this year.
Amid US investors' demand for diversification, Citi raised its year-end targets for HSI by 2 percent to 25,000 points in early May and maintained it until today, said Lau.
The target indicates a 7.6 percent climb to come from today midday's close at 23,231.
Lau also sees lower urgency for Beijing to roll out new strong monetary and fiscal stimuli, as the current economic situation is not as worrying as during the pandemic and mainland China can probably reach the full-year gross domestic product growth target of around 5 percent.
"If the final tariff rates imposed by the United States on Chinese exports exceeded the acceptable range, Beijing might release new fiscal policies then to offset the trade shock", Lau added.
In addition, Lau also sees limited impact from the ongoing Iran-Israel conflict on the economy and stock markets in mainland China and Hong Kong.
