Citi’s stock analysts reshuffled their top China plays after their downgrades outnumbered upgrades in the most recent earnings season. China’s “economic recovery looks to be slower than market expectations,” the strategists said in a Sept. 2 report. “In our view, the economy will improve materially provided that there is important and sustainable policy easing by way of COVID lockdown measures, the prospects for that are uncertain.” “Monetary support is restricted by concerns about excessive Rmb depreciation and monetary measures are constrained by lower property sales,” they said. Investment banks have repeatedly cut their forecasts for China’s gross domestic product this 12 months as tight Covid controls have restricted business activity. Beijing signaled in late July that no large-scale stimulus was on the way in which, and that its Covid policy wouldn’t change. It’s against this economic backdrop that Citi’s analysts downgraded 12 China stocks and upgraded eight. Listed below are three stocks from their updated list of top Hong Kong and mainland-traded Chinese stocks to purchase. PetroChina Price goal: 4.40 Hong Kong dollars (56 cents), for an almost 28% upside from Thursday’s close. The state-owned energy giant is Citi’s pick for the second half of this 12 months “because it is a direct beneficiary of high oil prices,” the analysts said. They upgraded the stock from “neutral” to “buy,” with a recent goal price of HK$4.40. The analysts expect PetroChina to regulate losses within the second half of the 12 months since there will probably be higher market dynamics: higher energy prices within the winter and lower input costs from Russian gas. Meituan Price Goal: 235 Hong Kong dollars, for a 37% upside from Thursday’s close. Citi analysts added this web name to their top China stock picks, replacing NetEase. Meituan operates China’s version of Yelp, in addition to food delivery, ride-hailing and other consumer services. The corporate has “proven to be a trusted local services platform partner for merchants and reliable lifestyle app for consumers,” the analysts said. They said the just like the stock for “strong execution, swift adaptation to the difficult environment and successful roll out of latest product services.” Haier Smart Home Price goal: 36 Chinese yuan ($5), for an upside of 39% from Thursday’s close. Though Citi analysts prefer H-shares in Hong Kong to the mainland’s A-shares, Shanghai-traded Haier Smart Handmade the list of top stocks to purchase. “Growth is especially driven by [average selling price] on high-end product mix improvement and overseas expansion,” the analysts said, adding that declines in raw material prices boost profitability. Haier’s overseas revenue grew by 13% last 12 months , versus just 4% in China.
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