Financial market research and analysis

China Communist Party’s twice-a-decade congress was among this week’s highlights.

In his three-hour opening speech, President Xi Jinping said that China will let the market play a decisive role in resource allocation and be innovative on foreign investments, while emphasizing that the country must build and strengthen its confidence to make the socialist culture prosperous.

Xi said that China experienced "deep, fundamental changes in the past five years" and stressed out that liberalization will continue and improve. The emerging market giant will likely concentrate its efforts on green development as well as on progress featuring innovation, coordination, openness and sharing. It appears that China will encourage quality over quantity in the coming years. The transition from the factory of the world to innovative economy gives a large pallet of opportunities in technology related businesses.

It is also important to note that this far, reforms that boosted economic activity and supply side have been more beneficial to investors than financial reforms per se. Therefore, the supply side reforms are key for global equity traders.

Here are some of LCG’s top picks in light of the Chinese growth story:


Chinese tech giants are booming

Alibaba and Tencent are China’s emerging tech giants. With their innovative technologies, these two companies changed their users’ everyday lives and their popularity is set to extend inside China and beyond borders with international business partnerships.

As a result, 94% of investors surveyed on Bloomberg have a positive view on Alibaba (US) shares, 6% prefer staying on hold with a 12-month average price target of 204.65. The current price is 175.32. There is no selling recommendation.
Likewise, 95.65% of investors have a positive view on Tencent (Hong Kong), 4.35% are on hold with an average target price of 384.16. The current price is 354.60. There is no sell recommendation.


Mining stocks are mixed on Belt and Road initiative

The recent Belt and Road project aims for massive infrastructure spending to boost growth inside China and through the ancient Silk Road. The Chinese growth story could therefore have a positive impact on commodity prices and could enhance global miners’ earnings in the same way the slowdown story sent them to the bottom.

Meanwhile, the Chinese growth has not sufficiently picked up and/or pending questions on bad loans, central government rule and China’s alternately paradoxical position regarding the globalization prevented the Belt and Road initiative from translating into the market prices this far. Traders should note that besides the commodity prices, idiosyncratic factors, such as the strength of companies’ balance sheets and various incidents, play an important role in mining stock valuations and picking the right stock is as important as trading the right strategy.

The most recent Bloomberg survey suggests a mixed picture across the leading mining stocks.

Glencore (London)
Buy/sell/hold: 55.17%/37.93%/6.90%
Current price: 374.65
12-month average target price: 394.78

Rio Tinto (London)
Buy/sell/hold: 58.62%/31.03%/10.34%
Current price: 3599.00
12-month average target price: 3956.62

Antofagasta (London)
Buy/sell/hold: 23.08%/30.77%/46.15%
Current price: 992.50
12-month average target price: 917.48

BHP Billiton (London)
Buy/sell/hold: 32.14%/42.86%/25.00%
Current price: 1390.00
12-month average target price: 1438.99

Anglo American (London)
Buy/sell/hold: 36.67%/46.67%/16.67%
Current price: 1428.00
12-month average target price: 1422.48


The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. Losses can exceed deposits.