Policy incentives outlined during China’s annual “two sessions” have fed speculative interest in the market in the last two weeks. In particular, the financial sector has become the biggest beneficiary after Beijing said banks would be allowed to apply for securities trading licenses, and as the finance ministry announced a debt-swap plan.
A number of bank plays notched limit-up 10 percent gains recently. And the financial industry will continue to benefit from government support, going by the comments made by Premier Li Keqiang at a news conference Sunday.
Beijing will maintain its strategy of opening up the market further. This will bring more opportunities for private companies, but will also force the financial sector to accelerate reforms. Industry players will seek business diversification, encompassing securities, banking, insurance and internet finance.
Currently, Ping An Insurance Co. of China (601318.CN) stands out from its peers as it already has a presence in all these segments. Investors should pay close attention to the stock.
Meanwhile, one should bear in mind that the anti-corruption fight is also rippling into the financial sector. Minsheng Bank chief Mao Xiaofeng was taken away by China’s anti-graft watchdog recently. That might be a prelude to a broad corruption crackdown in the sector this year.
Media reports have said that the China Securities Regulatory Commission (CSRC), the nation’s top securities regulator, will inspect over 200 organizations to check for any misconduct such as bribery and corruption. The inspections might lead to some leadership reshuffle in the sector, and exert short-term pressure on stock prices.
Apart from finance, online shopping is another hot spot. Premier Li said on Sunday that he himself had tried to buy goods online, and that he is happy to promote e-commerce and online shopping. The businesses have not only stimulated consumption but also created a great number of jobs.
After he took office, Li has repeatedly stressed that the GDP figure is not the main target in China’s economic development. Instead, the government cares more about steady employment and economic restructuring.
Online shopping is an emerging new service industry, which has made it one of the most ideal industries amid the economic restructuring initiatives.
Also, e-commerce creates millions of jobs, helping the government efforts to maintain social stability.
China’s online shopping market size has soared to 2.8 trillion yuan last year, according to data from the National Statistics Bureau. The e-commerce sector already accounts for 10.7 percent of total social retail sales.
The sector is in the midst of fast expansion, which should offer lucrative returns for investors. However, many e-commerce firms have opted for overseas listings in light of lengthy and rigid approval process on the mainland.
Nevertheless, investors should find some attractive plays that are expanding into online shopping or logistics services sectors.
For example, Suning Commerce Group (002024.CN) has developed its own online home appliances shopping platform, while Qingdao Haier (600690.CN) and China Railway Tielong Container Logistics Co. (600125.CN) are active players in e-commerce logistics services.
Also, Li said during his press conference that housing demand remains resilient, and that the government will ensure healthy and stable development of the property sector. The remarks should substantially ease market concerns about the real-estate sector.
Authorities may not launch further tightening measures on the sector. In fact, there is a greater chance for some policy relaxation.
A number of cities have already purchased apartment blocks from the market for use as public housing. And the government is likely to lower the down-payment ratio this year. All these measures should benefit mainland property plays this year.
This article appeared in the Hong Kong Economic Journal on March 16.
Translation by Julie Zhu
[Chinese version 中文版]
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