Investors can expect more Chinese green bond issues.
Investment themes will include environmental protection and spending on
technological innovation, healthcare, water conservation and renewable energy.
With a development vision through 2035, there are crucial
strategic investment implications:
Growth target
The Plenum communique did not set any growth target for the
next five years, probably because of the increasing challenges to growth and
geopolitical volatility. At a later date, Beijing may set a 5.5% to 6.5% range
for medium-term growth to anchor macroeconomic policy in the new five-year
plan.
Industrial migration and hence reverse urbanisation to the
inner parts of the country to spread income and consumption growth more evenly
will be key trends to monitor when investing in the domestic-oriented sectors.
Dual circulation
This has been reiterated as the strategic policy direction
for the medium-term:
Continuing the push for (but not relying on)
external circulation by opening up the domestic system, and through the Belt
& Road Initiative and renminbi internationalisation.
Domestically, the emphasis is on high-end manufacturing and
technology, and redirecting Chinese consumers’ overseas spending to the
domestic market.
This should be positive for domestic retailers
and companies catering to Chinese buyers who previously bought items abroad.
It is negative for those companies and countries
whose retail businesses depend on Chinese tourists.
As China steps up its efforts to substitute imports and
strengthen self-sufficiency, domestic brands in the technological and financial
innovation sectors, industrial consolidation and consumer-upgrading will be the
long-term themes driving should the equity market.
This argues for cutting positions in companies
with a high overseas exposure, such as consumer electronics companies.
It would make sense to increase the allocation
to companies and sectors that are related to state investment in the priority
sectors on the policy agenda such as aerospace, defence and domestic high-tech
industries.
Technology innovation and self-sufficiency
Industrial consolidation & upgrading and innovation
& technological independence are set to speed up and become a strategic
pillar for future development.
Expect higher R&D spending by the government in the
next 5-10 years, with a focus on:
AI
Cloud computing
5G networks
Digitisation (including, but not limited to a
digital renminbi)
Big data.
Green economy and climate change
The Plenum called for faster carbon emissions control by
2035, setting higher standards for environmental protection and pollution. This
includes a higher share of non-fossil energy in overall energy consumption and
reducing the energy use per unit of GDP and CO2 and SO2 emissions.
This should be positive for investment in related
equipment and services.
Any views expressed
here are those of the author as of the date of publication, are based on
available information, and are subject to change without notice. Individual
portfolio management teams may hold different views and may take different
investment decisions for different clients. This document does not constitute
investment advice.
The value of
investments and the income they generate may go down as well as up and it is
possible that investors will not recover their initial outlay. Past performance
is no guarantee for future returns.
Investing in
emerging markets, or specialised or restricted sectors is likely to be subject
to a higher-than-average volatility due to a high degree of concentration,
greater uncertainty because less information is available, there is less
liquidity or due to greater sensitivity to changes in market conditions
(social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
