China seems to have sailed through the worst phase of the Covid-19 pandemic with new infections nearly hitting zero.
Stock markets across the globe are responding to the good news with stock rallies happening in nearly all major economies. China Shanghai Composite, an index that tracks all stocks traded on the Shanghai stock exchange, closed 0.7 per cent higher on Friday 17 April, despite the announcement that the Chinese economy has contracted 6.8 per cent since January.
The Hang Seng and Mumbai Sensex also edged higher, gaining 1.56 and 3.22 per cent respectively. According to Trading Economics, the rebound is the result of Donald Trump’s intention to open the US economy. China is already restoring its production capacity to normal and hoping that the reopening of major economies will help boost the demand for its products.
The investors are also reacting positively to the news on the Chinese stock market about Gilead Sciences’ antiviral medicine that is proving effective in treating people infected with the coronavirus. There is hope that conditions will keep improving, and the Chinese stock market trend can only get better.
Chinese stock market overview: will the economy recover fast?
China has recently released data projecting slow but stable long-term economic growth despite the novel Covid-19 pandemic.
As mentioned above, the China National Bureau of Statistics has released a report showing the economy contracted 6.8 per cent between January and March. This is more than analysts had predicted, but the markets seem to have shrugged off the news given Friday’s rally.
Chinese authorities are also upbeat about the impact of the pandemic on long term economic growth. Moreover, the IMF predicts that China’s economy will surge next year, at levels not witnessed since 2011. The IMF is positive that the pandemic will end this year and will not inhibit the projected growth for most emerging and developing economies.
Therefore, this may be the best time to buy for long term and medium-term investors. Traders should also take advantage of the volatility resulting from Covid-19 developments. Analysts recommend short term investors to hold until the markets are stable enough.
Chinese money markets funds have gained a lot of attention from short-term investors, given their liquidity and returns above the inflation rate. Furthermore, they have proven to perform better than saving plans provided by banks.
Best Chinese stocks for medium-term and long-term investment
Industries that have shown stable growth pre-corona-virus pandemic and have not been affected directly by the lockdowns are the best bet for medium-term/long-term investment.
Analysts also recommend companies whose product demand has increased with the pandemic. These are mostly in the healthcare and online retail industries. Long term investors should not only focus on projected growth but also on dividend payments.
The top Chinese stocks to invest now for medium and long term investment include Alibaba (BABA), and JD.com (JD). Alibaba online sales only dropped by 3 per cent in January and February, which is insignificant compared to analyst projections. With the Covid-19 pandemic waning, online retail sales in China are bound to return to the normal growth trajectory of 15%+.
Alibaba cloud business is also booming with the pandemic as companies move most of their services online. As anticipated, the demand for BABA's cloud services will maintain stable growth in the long term. The demand may skyrocket now that the company has announced that it’s launching a global AI platform to help healthcare professionals fight the coronavirus pandemic.
JD.com, on the other hand, is on the same trajectory with its management, projecting a 10 per cent gain in the first quarter of 2020. The company is among the fastest-growing in the online retail industry and is expected to pick up pace as soon as the coronavirus dust settles. Analysts project that the stock will get back to the 20%-plus growth in Q2, Q3, and Q4.
Chinese stock market news: best picks for CFD trading
Stock volatility is critical in CFD trading. Investors should grab the opportunity of the covid-19 driven volatility to trade Chinese stocks. Energy commodities are also highly volatile as OPEC and other oil-producing countries continue to address the current glut.
The list of volatile Chinese shares today include:
- Air China Limited provides air passenger, air cargo, and airline-related services in Mainland China, Hong Kong, Macau, Taiwan, Europe, North America, Japan, Korea, the Asia Pacific, and internationally.
- Meituan Dianping is a China-based e-commerce platform providing life services. The company connects consumers and businesses to provide services satisfying people's daily eating needs.
- China Life Insurance Company Limited is a life insurance company in the People's Republic of China. The company operates in four segments: Life Insurance Business, Health Insurance Business, Accident Insurance Business, and Other Business. It offers individual and group life, annuity, accident, and health insurance products, as well as pension products.
- Metallurgical Corporation of China engages in the engineering contracting, property development, equipment manufacture, and resource development businesses in China and internationally.
Bottom line: investing in Chinese stocks
The coronavirus pandemic appears to be short-lived and may not have a significant impact on the long-term growth projections of the Chinese economy. Consequently, this seems to be the best time for short-term and long-term investors to identify and buy undervalued stocks.
Day traders also have an opportunity to trade the coronavirus-virus driven volatility until a lasting solution is found. Latest Chinese stock market news indicates a fast rebound as new cases of coronavirus infections continue to fall.
Follow the latest news to learn what is happening with the Chinese stock market at Capital.com. Make your own list of top Chinese stocks to trade with CFDs.