Growth Dragons Weekly: The Chinese Are Richer Than a Year Ago, Yet They Feel Poorer
Here’s what happened in Growth Dragons this week:
The Chinese Are Richer Than a Year Ago, Yet They Act Poorer
Li Auto: The New Winner in the EV Industry
Baidu Intensifies Focus on AI Amid Rising Costs
NetEase Rides Wave of Gaming Recovery, Profits Surge by 67%
Xinyi Solar Shares Soar 20% Following Strong Financial Performance
#1 The Chinese Are Richer Than a Year Ago, Yet They Feel Poorer
According to the National Bureau of Statistics, China's nominal disposable income surged by 6.3% year-over-year. Adjusted for inflation, the real growth stands at 6.1%. Notably, rural citizens witnessed a real income increase of 7.6%, compared to a 4.8% rise among urban residents. These figures indicate a robust economy, with Chinese citizens enjoying greater purchasing power. Despite this, a significant portion of money is being saved rather than spent, leading to China's economic growth being pegged at only 5.2% last year. This trend is attributed to the diminishing wealth effect amidst falling housing prices, making the Chinese feel poorer despite being richer in real terms.
The overall real income growth outpacing real GDP growth suggests fundamental economic improvement, driven by increased productivity across various sectors. Additionally, the significant income growth among rural residents compared to their urban counterparts indicates effective income distribution.
Moreover, China's official manufacturing PMI dipped slightly to 49.1 from 49.2 in December, signaling persistent lukewarm demand. Since April 2023, the manufacturing PMI has fluctuated between 49 and 50, suggesting a potential stabilization point. Given the rise in income, global reopening, and governmental stimulus, a further contraction in manufacturing appears unlikely.
Foreign investor confidence has been bolstered by government efforts to support the stock market, resulting in a net investment of 60.7 billion yuan by foreign funds in the Shanghai and Shenzhen exchanges. Analysis by SPDB International highlights a concentration of foreign investment in low-valuation, high-dividend-yield equities, particularly in sectors like banking and insurance. Notably, Kweichow Moutai, China Merchants Bank, Ping An Insurance, and Contemporary Amperex Technology emerged as the most sought-after stocks in February, indicating foreign investors' belief in the potential upturn of the Chinese stock market through the acquisition of stable, large-cap stocks.
The performance of select Chinese stocks across various industries has been impressive, diverging from past recoveries to suggest a more sustainable upturn.
Despite these positive indicators, major stock indices such as the Hang Seng Index and the MSCI China Index have yet to show a convincing recovery, primarily due to underperformance by major tech companies like Alibaba and Tencent, which significantly influence these indices. However, the CSI 300 Index, comprising solely A-shares, has fared better. This discrepancy may be attributed to domestic support for A-shares over offshore markets. It's crucial to look beyond mainstream indices and favored stocks to recognize the recovery signs in other sectors, as demonstrated by the strong performance of the companies listed above.
