Recovering economy, infrastructure construction to drive equity prices higher
Domestic stocks will perform better in 2017 than in 2016, a UBS Securities analyst said during a press conference on Monday, echoing other predictions for Chinese shares this year.
Gao Ting, head of China Strategy at UBS Securities, predicted that the CSI 300 Index of the biggest companies traded in Shanghai and Shenzhen will rise to about 3,750 points by the end of this year. The blue-chip index closed at 3,363.90 points on Monday.
Gao said domestic stocks will continue to rise because the Chinese economy is showing signs of improvement.
Most major securities firms that have issued forecasts for 2017 have predicted stocks will do better this year than in 2016, according to domestic media reports.
The economy appeared to turn the corner in the third quarter of 2016 - around the same time that stocks pushed higher. "This shows that A share markets' performance is closely connected with the country's economy," Gao said.
Chinese mainland stocks took a dive at the beginning of 2016, fluctuating wildly until mid-2016, when they stabilized.
According to Gao, the domestic economy will be stable in 2017. "This year, the government will boost infrastructure construction to offset the influence of a declining real estate sector, and Public-Private Partnership projects will grow significantly in China," Gao said at the press conference.
He also predicted that China's economic transition will continue, with overseas direct investment likely to grow rapidly and the service sector contributing more to the economy.
China's economy will grow by around 6.4 percent in 2017, , UBS Securities noted in a statement sent to the Global Times on Monday.
UBS Securities also predicted that the yuan will depreciate further against the US dollar, with the exchange rate falling to 7.3 yuan by the end of the year.
However, a weaker yuan won't have too much of an impact on mainland stocks because domestic stock markets are not that reliant on export-driven companies, Gao said.
Liu Dongliang, a senior analyst at China Merchants Bank, also predicted that domestic shares will experience moderate gains in 2017, according to a statement he sent to the Global Times in December 2016.
