ZT: China's Macroeconomic Outlook

China’s rapid pullback of its Zero-COVID policy will likely have major ramifications for the world’s second largest economy. Most recently, news that China will no longer subject inbound travellers to quarantine with effect from 8 January 2023 puts the country on track to emerge from its approximately 3 years of self-imposed global isolation. This recent move can be interpreted as a step towards a full border re-opening.  

中國迅速取消清零政策，可能會對這個世界第二大經濟體產生重大影響。報道稱，從1月8日起，中國將不再對入境旅客進行檢疫，這使得中國有望結束大約3年的自我隔離狀態。最近的這一舉措，可以被理解為中國朝著全麵重新開放邊境邁出了關鍵性的一步。 

 

 

What can we expect?

Transitional pains in the form of rising COVID cases which could result in labour shortages in H1 2023, would be expected. We may also see foreign governments restricting entry of travellers from China out of fear of infections spreading; with the US, UK, Australia, and Canada recently joining a growing list of nations requiring COVID tests for travellers from China. Specifically, with effect from 5 January 2023, the US requires inbound Chinese travellers to show a negative COVID test prior to entry. We therefore expect the re-opening process to be a gradual and bumpy one in H1 2023, with the upcoming Chinese New Year serving as a major test of the government’s resolve to proceed with their policy shift. We should have greater clarity regarding the trajectory of China’s re-opening after the Chinese New Year. We expect Chinese markets to remain volatile in H1 2023.  

 

接下來我們期待什麽？

因中國更有可能遇到過渡期的痛苦，也就是新冠病例增加，這可能導致2023年上半年的勞動力短缺。我們還可能看到外國政府因擔心感染擴散而限製來自中國的旅行者入境；美國、英國、澳大利亞和加拿大最近將來自中國的旅行者加入了需要進行核酸檢測的國家名單。具體而言，從1月5日起，美國要求入境的中國旅客在入境前出示核酸檢測的陰性證明。因此，我們預計在2023年上半年，重新開放的過程將是一個循序漸進且並不容易的過程，中國政府在進行政策轉變時麵臨的主要考驗是即將到來的春節。春節過後，我們應該對中國重新開放的軌跡有更清晰的認識。我們預計中國市場在2023年上半年將保持波動。 

 

Nevertheless, if the government is able to prevent infections from getting out of control, we believe the re-opening will result in short-term pains but bring long-term gains to the economy and stock markets. We maintain our view that a full reopening could begin in H2 2023, driving a subsequent stock market recovery well into 2024; with H1 2023 presenting a good opportunity for investors to buy into Chinese stocks at more attractive valuations. Growth will be supported by the recovery of the tourism industry as the economy returns to normalcy, as well as international events in 2024 such as the Formula One race in Shanghai. Downside risks lie in a potential policy backtrack due to a surge in COVID cases on the back of increased domestic travel during the Chinese New Year. 

盡管如重新開放將帶來短期的痛苦，但如果中國政府能夠防止感染失控，那麽我們相信，這將會為經濟和股市帶來長期收益。我們將保持我們的觀點不變：全麵重新開放可能在2023年下半年開始，直到2024年，將會推動中國股票市場進入回恢複上升期；2023年上半年是投資者以更具吸引力的估值買入中國股票的好機會。隨著經濟和旅遊業的全麵複蘇，加上包括即將於2024年在上海舉行的一級方程式賽車比賽在內的國際賽事等，無一例外地在支持中國投資市場的增長。但需要注意的是，下行風險在於，由於春節期間中國國內旅行增加，新冠病例激增，可能會出現政策變動。 

 

Ultimately, we believe a paradigm shift in the government’s approach towards the pandemic and a renewed policy focus towards reviving economic growth brightens the equity outlook for China in 2023. 

歸根結底，我們認為，由於中國政府在應對新冠疫情方麵的政策轉變和以恢複經濟增長的重點政策，使中國2023年的股票市場前景更加光明。 

 

Which China stocks should we look out for?

Additionally, should the economic re-opening proceed smoothly, we foresee a surge in travel demand and revenge spending by Chinese consumers. Following the removal of quarantine restrictions for inbound travellers, data from Trip.com Group Ltd showed bookings for outbound flights from mainland China jumped by 254% while bookings for inbound flights increased by 412%. Similarly, online searches for overseas destinations surged by about 1,000% to hit a 3-year high. We favour stocks with exposure to the aviation, tourism services, hospitality, and the retail industry. Stocks we like are Air China Ltd (SSE), Lijiang Yulong Tourism Co Ltd (SZSE), BTG Hotels Group Co Ltd (SSE), China Tourism Group Duty Free Corp Ltd (SSE) and Shanghai Yuyuan Tourist Mart Group Co Ltd (SSE).

 

我們應該關注哪些中國股票？

此外，如果經濟重新開放進展順利，我們可以預見中國消費者的旅遊需求和報複性消費將激增。在取消對入境旅客的核酸檢測限製後，攜程集團有限公司的數據顯示，中國大陸出境航班的預訂量猛增254%，入境航班的預訂量增加412%。與此同時，使用者對海外目的地的在線搜索數據激增約1,000%，創下三年來的新高。因此，我們建議關注航空、旅遊服務、酒店和零售業的股票。我們建議關注的股票有：中國國際航空股份有限公司，麗江玉龍旅遊股份有限公司 ，北京首旅酒店(集團)股份有限公司，中國中免股份有限集團和上海豫園旅遊商城股份有限公司。 

We also favour cyclical and economically-sensitive stocks that should benefit as domestic and international business activity picks up in H2 2023. We like companies operating in the industrials, tech, and consumer discretionary sector, as well as stocks that generate at least 30% of their revenue from outside the Greater China region, such as COSCO SHIPPING Holdings Co Ltd (SSE), Zhengzhou Coal Mining Machinery Group Co Ltd (SSE), Semiconductor Manufacturing International Corp (SSE), Triangle Tyre Co Ltd (SSE) and Xiamen Intretech Inc (SZSE).

 此外，我們還看好周期性和對經濟敏感的股票，這些股票應該隨著國內和國際商業活動在2023年下半年的回升而受益。我們喜歡在工業、科技和消費類行業經營的公司。我們找出了那些至少有30%的收入來自大中華區以外的股票供參考： 中遠海運控股股份有限公司、鄭州煤礦機械集團股份有限公司、中芯國際、三角輪胎股份有限公司和廈門盈創科技。