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4 Stocks to Buy on China's Stimulus for Economic Revival
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China’s government launched its biggest post-pandemic monetary stimulus package late last month and signaled that more fiscal support was on the way. Most sectors in the U.S. economy reacted favorably to the news, and markets rose on cue.
The package announced by the People’s Bank of China (“PBOC”) is tripartite. First, the PBOC has committed to bring down reserve requirement ratios (RRR) by a half percentage point and the main policy interest rate by 0.2 percentage points. The PBOC governor also indicated that this may not be the only cut to the RRR before the year ended. The central bank will consider cutting the rate further depending on the economic situation.
Secondly, the PBOC will be reducing mortgage rates for existing home loans by a half percentage point. I will also set the nationwide minimum down payment requirement for second homes at 15% from the much higher 25%. It will also raise its funding support from 60% to 100% for commercial banks extending loans to locally-owned state firms.
Third, eligible institutional investors will be able to borrow treasury bonds and central bank bills directly from the PBOC, using assets like ETFs as collateral, and then sell them to get the cash they need to invest more in equity markets. The central bank will provide refinancing loans for banks extending credit to publicly traded companies aiming to buy back their own shares.
Apart from these, there is growing consensus in China’s markets that additional special sovereign bonds worth about RMB 2 trillion are to be introduced in the coming weeks to offset the spending gap and help local governments tackle their debt problems.
With global demand and supply across sectors heavily linked with China’s economic condition, Wall Street has apparently interpreted this as good news, even as the energy sector has not shown signs of an expected demand revival in the Asian country. It will be prudent to invest in the following stocks.
Alibaba Group Holding Limited (BABA - Free Report) provides tech-infra and marketing assistance to businesses to engage with their users and customers in China and globally.
Alibaba Group’s expected earnings growth rate for the current year is 0.7%. The Zacks Consensus Estimate for its current-year earnings has improved 5.9% over the past 60 days. The company has a Zacks Rank #2.
Amphenol Corporation (APH - Free Report) is a designer and manufacturer of electrical, electronic and fiber optic connectors in the United States, China and globally.
Amphenols’ expected earnings growth rate for the current year is 16.6%. The Zacks Consensus Estimate for its current-year earnings has improved 1.2% over the past 60 days. The company has a Zacks Rank #2.
Atour Lifestyle Holdings Limited (ATAT - Free Report) is a hotel-centric lifestyle brand company based in China.
Atour’s expected earnings growth rate for the current year is 32.6%. The Zacks Consensus Estimate for its current-year earnings has improved 9.9% over the past 60 days. The company has a Zacks Rank #1.
Trip.com Group Limited (TCOM - Free Report) engages in the business of providing travel services in China and globally.
Trip.com’s expected earnings growth rate for the next year is 22.6%. The Zacks Consensus Estimate for its current-year earnings has improved 6.3% over the past 60 days. The company has a Zacks Rank #2.
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4 Stocks to Buy on China's Stimulus for Economic Revival
China’s government launched its biggest post-pandemic monetary stimulus package late last month and signaled that more fiscal support was on the way. Most sectors in the U.S. economy reacted favorably to the news, and markets rose on cue.
The package announced by the People’s Bank of China (“PBOC”) is tripartite. First, the PBOC has committed to bring down reserve requirement ratios (RRR) by a half percentage point and the main policy interest rate by 0.2 percentage points. The PBOC governor also indicated that this may not be the only cut to the RRR before the year ended. The central bank will consider cutting the rate further depending on the economic situation.
Secondly, the PBOC will be reducing mortgage rates for existing home loans by a half percentage point. I will also set the nationwide minimum down payment requirement for second homes at 15% from the much higher 25%. It will also raise its funding support from 60% to 100% for commercial banks extending loans to locally-owned state firms.
Third, eligible institutional investors will be able to borrow treasury bonds and central bank bills directly from the PBOC, using assets like ETFs as collateral, and then sell them to get the cash they need to invest more in equity markets. The central bank will provide refinancing loans for banks extending credit to publicly traded companies aiming to buy back their own shares.
Apart from these, there is growing consensus in China’s markets that additional special sovereign bonds worth about RMB 2 trillion are to be introduced in the coming weeks to offset the spending gap and help local governments tackle their debt problems.
With global demand and supply across sectors heavily linked with China’s economic condition, Wall Street has apparently interpreted this as good news, even as the energy sector has not shown signs of an expected demand revival in the Asian country. It will be prudent to invest in the following stocks.
Our Picks
We have, thus, selected four stocks intrinsically linked to China. These stocks flaunt a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
Alibaba Group Holding Limited (BABA - Free Report) provides tech-infra and marketing assistance to businesses to engage with their users and customers in China and globally.
Alibaba Group’s expected earnings growth rate for the current year is 0.7%. The Zacks Consensus Estimate for its current-year earnings has improved 5.9% over the past 60 days. The company has a Zacks Rank #2.
Amphenol Corporation (APH - Free Report) is a designer and manufacturer of electrical, electronic and fiber optic connectors in the United States, China and globally.
Amphenols’ expected earnings growth rate for the current year is 16.6%. The Zacks Consensus Estimate for its current-year earnings has improved 1.2% over the past 60 days. The company has a Zacks Rank #2.
Atour Lifestyle Holdings Limited (ATAT - Free Report) is a hotel-centric lifestyle brand company based in China.
Atour’s expected earnings growth rate for the current year is 32.6%. The Zacks Consensus Estimate for its current-year earnings has improved 9.9% over the past 60 days. The company has a Zacks Rank #1.
Trip.com Group Limited (TCOM - Free Report) engages in the business of providing travel services in China and globally.
Trip.com’s expected earnings growth rate for the next year is 22.6%. The Zacks Consensus Estimate for its current-year earnings has improved 6.3% over the past 60 days. The company has a Zacks Rank #2.