Markets

China's stocks may rise 17% in H2 on faster growth, Shenyin says

(Agencies)
Updated: 2010-06-24 15:10

China's stocks, Asia's worst performer this year, may rise 17 percent in the second half because the government won't step up measures to rein in economic growth, according to Shenyin & Wanguo Securities Co.

The benchmark Shanghai Composite Index may rebound to the 3,000 level as urbanization and the government's push to move manufacturing industries into poorer regions increases investment, Shenyin & Wanguo said in a press release before the start of an investment conference in Shanghai.

The Shanghai Composite slipped 0.2 percent to 2,565.11 at 10:32 a.m., adding to a 22 percent loss for the year on concern government measures to slow gains in housing prices and the European debt crisis will hurt growth in the world's third- largest economy. The decline has driven down the gauge's valuation to 15.1 times estimated earnings, the lowest since February 2009, according to weekly data compiled by Bloomberg.

Shenyin & Wanguo, voted China's most influential research unit by New Fortune magazine last year, joins BNP Paribas, Morgan Stanley and AMP Capital Investors Ltd in boosting their outlook for the nation's stocks after the central bank signaled last weekend that it will loosen the yuan's peg to the dollar.

The yuan may appreciate 3 percent in 2010, while gross domestic product grows at 10.2 percent this year, Li Huiyong, the brokerage's economist, said at the conference.

No double dip

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Economic growth will slow to 9.6 percent in the third quarter and 9 percent in the following three months, from 10.5 percent in the second quarter, according to as many as 21 economists surveyed by Bloomberg. The economy expanded 11.9 percent in the first quarter, the fastest pace in almost three years.

"Growth of 9 percent to 10 percent is a very healthy level for China, which isn't a pessimistic figure," said Li. "I don't see the risk of a double-dip recession."

The government will build 270 million square meters of low- income housing this year, which will partly offset the crackdown against speculation in the property market, he said.

Shenyin & Wanguo recommended investors buy shares of cement companies, steelmakers and paper manufacturers.