JPMorgan, Citi raise full-year projections for China’s economy

China's economy is on the rebound — and that's good news for 3 of the Club's consumer stocks

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China’s economy grew 4.5% in the very first quarter of 2023, beating expectations.

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Analysts at JPMorgan and Citi raised their full-year projections for China’s economy after it provided an outstanding first-quarter gdp development of 4.5% on Tuesday.

JPMorgan raised its 2023 development outlook to 6.4%, up from a previous projection of 6%, stating the most recent quarterly report indicate more development ahead.

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“The strong 1Q GDP report points to a strong post-reopening recovery,” JPMorgan’s chief China economic expert Haibin Zhu stated in a Tuesday note.

“A range of factors have led the strong rebound in 1Q activity, including a notable rebound in travel-related consumption and services,” Zhu composed.

“The stronger-than-expected 1Q GDP reading lifts our full-year GDP growth forecast,” he stated, including that China’s healing “will likely continue in the near term” prior to its development momentum begins softening in the 2nd half of the year.

Citi likewise raised its projection to an above-consensus view of 6.1% from its previous projection of 5.7%, stating the Chinese economy is “well on track on its post-Covid recovery led by consumption and services.”

The company included that the stronger-than-expected first-quarter development recommends more development ahead.

“Given meaningful recovery perhaps only started after the Chinese New Year, the underlying momentum could be stronger than the headline number suggests,” Citi financial experts led by Xiangrong Yu stated in a Tuesday note.

Citi financial experts kept in mind that while services surpassed in the consumption-driven development for the very first quarter, they stay careful on their projections.

“The release of pent-up demand during Covid and holiday helped, but we remain cautious on its outlook without big stimulus in sight and the discounts intensifying,” Citi financial experts composed.

UBS likewise raised its projection for the year from 5.4% to 5.7%, “given the stronger-than-expected recovery in Q1 2023, driven by both a robust rebound in consumption and property.”

April conference ahead

Citi stated in its Tuesday note that the upcoming Politburo conference might be an opportunity for policymakers to enhance extra self-confidence in the economic sector.

“We don’t think the policymakers will lay back comfortably, as various structural issues are calling for additional efforts,” Citi financial experts composed, including that the most recent financial information reduces the requirement for more stimulus.

“With the Q1 GDP data, the top leadership could meet in the April Politburo meeting to discuss economic related issues. We were having low expectations on stimulus this year, and if anything, the Q1 data would perhaps lower stimulus expectations further,” they stated.

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Citi included that financiers must watch out for policies associated with structural reform ahead.

“This year could also be a window of opportunity for the government to come up with a holistic and institutional solution to local government debt. With economy stabilization playing out, structural reform could be the next theme to watch,” Citi financial experts composed.

HSBC likewise stated in a note that keeping the healing momentum will be a job for China’s policymakers.

“The recovery remains uneven, property investment has yet to fully stabilize, while private investment growth dropped into contractionary territory,” HSBC financial experts led by Erin Xin composed.

“Thus, Beijing will need to stay on its toes and provide ongoing policy support to sustain the recovery momentum,” HSBC stated.

Upside danger

Morgan Stanley hinted in its Tuesday note it might make comparable relocations ahead, stating the company sees upside run the risk of to its full-year projection of 5.7% development.

“Risks facing our full-year GDP forecast of 5.7%Y is now skewed to the upside given a strong entry,” Morgan Stanley financial experts led by Zhipeng Cai composed.

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They included that approximately 4.8% quarterly development in the staying duration of the year “could be overachieved” due to low inflation levels in China.

China’s customer inflation struck an 18- month low previously this month.

“Sequential growth may soften in 2Q as growth YTD was partly supported by pent-up demand and catch-up in labor-intensive exporters,” Morgan Stanley financial experts composed.

BNP Paribas likewise stated its full-year projection of 5.6% “now looks tilted to the upside” following the GDP report for the very first quarter.

“The ongoing recovery is two-speed, with services outperforming goods and consumption outstripping investment and exports,” BNP Paribas financial experts Jacqueline Rong and Shan He composed.

“Property sales have more room to recover, but we think investment will continue to lag as developers transition to low-leverage and low-turnover business models,” they stated.