Stock Bulls Rejoice as China’s Market Breadth Improves

Chinese stocks are on the rise, with the MSCI China Index surging 29% since January and pushing half of its members above their 200-day moving averages. This broadening rally is a positive sign for investors, indicating greater confidence in Chinese shares due to cheap valuations and Beijing’s policy support.

According to analysts at HSBC Holdings Plc. and Goldman Sachs Group Inc., the gains in Chinese stocks are expected to continue in the coming months. Wenchang Ma, a portfolio manager at Ninety One Hong Kong Ltd., notes that market breadth has improved, creating a good environment for bottom stock-picking across various sectors.

Consumer technology and financial firms have led the recovery in the MSCI China gauge, while property and materials shares have also seen significant gains. There are growing expectations for underperforming sectors like equipment makers, exporters, technology, and property to join the rebound.

Small- and medium-cap stocks are expected to benefit as the recovery spreads, with selective tech and property stocks likely to see a good rebound. HSBC’s analysis shows that previous advances in the Hang Seng China Enterprises Index have been followed by further gains, offering upside opportunities for investors.

Despite geopolitical tensions with the US and Europe, Chinese equities are attracting more bullish sentiment from Wall Street brokerages. Goldman Sachs has raised its 12-month target for some gauges, citing falling risks and historical evidence of additional returns in a technical bull market.

The expansion of the equities rebound is seen as a turning point for Chinese growth and asset price recovery, according to BNP Paribas Asset Management Asia Ltd. This positive outlook suggests that Chinese stocks may continue to outperform in the months ahead.