Foreign media analysis of A-share investment opportunities in 2018: "irresistible" in the long run

Chinese stocks are bound to be one of the investment opportunities in 2018: an opportunity that global investors can't turn a blind eye to, according to British media.

According to the Financial Times website reported on January 9, MSCI's landmark decision in 2017 to include Chinese A-shares in its "emerging market flagship index" is just the beginning. Once fully incorporated, China will become a vast part of the universe of international investment targets, with A-shares and other Chinese stocks traded on foreign stock markets constituting nearly half of the overall index.

A-shares will attract more foreign investors and capital inflows, which will help to change and diversify the composition of investors. Chinese retail investors hold about 90% of A-share assets, while foreign investors hold only about 2%.

China's A-shares are irresistible in the long run because they represent the so-called new Economy of China. China is a two-speed market, with obsolete industries like industry and big banks experiencing structural deceleration, while new consumer-oriented and service-oriented companies are driving economic growth.

Investors should focus on the improvement of the quality of China's economic growth and the further acceleration and expansion of corporate revenue growth brought about by China's new economy. Investors are often amazed at the depth and liquidity of the A-share market. The Shenzhen and Shanghai stock exchanges have the same value as the U.S. stock market, and the daily trading volume of the Shanghai and Shenzhen stock exchanges is higher than the total trading volume of the U.S. stock exchanges.

After a year of significant strengthening of value cyclical stocks, growth, especially high-quality growth, has become the theme of China's A-share market. For years, the return on shareholders' equity and earnings per share growth rate of China's new economy stocks has been outpacing that of traditional economy stocks, a structural trend that looks set to continue as important.

According to the report, with the support of a number of auxiliary factors, the opportunities in China's A-share market outweigh the risks. One factor is that the dollar strength appears to be easing or fading, which is a positive for China and emerging markets as a whole. Another factor is that revenue, which has declined over the past 5 years, is currently rebounding.

While investors have been worried for years about a possible hard landing in China, this is not one scenario. With the long-awaited structural adjustments in the country bearing fruit in 2018, whether it is curbing credit growth or implementing environmental controls, the outlook for the new year is encouraging.

China's new economy companies will continue their revenue growth and counter narratives of potential hard landings. It is time for international investors to recognize the potential of Chinese equities. (Compiler/Cao Weiguo)

File photo: On January 2, 2018, shareholders paid attention to the stock market at a securities business hall in Nanjing.