Chinese Stocks Set to Beat G20 in 2013, Citigroup Says

China’s yuan-denominated stocks are poised to outperform all Group of 20-nation equity markets in 2013 after posting the second-worst performance among global economies over the past three years, according to Citigroup Inc.

The Shanghai Composite Index rose 1 percent to 2,382.48 yesterday, extending its rally from a Dec. 3 low to 22 percent. A gain of 20 percent signals a bull market to some investors. Chinese equities will build on the advance in the first half of 2013 as earnings growth exceeds analysts’ estimates, Minggao Shen, the Hong Kong-based head of China research at Citigroup, said in an e-mailed response to questions yesterday.

The Shanghai A-share index may rise a further 12 percent from yesterday’s close of 2,493.78 to 2,780 in the first half, said Shen, reiterating a first-half target from Jan. 15. The MSCI China Index of Hong Kong-listed Chinese companies, which has jumped 28 percent since Sept. 5, may climb another 15 percent to 20 percent as profit growth for companies in the index expands as much as 15 percent this year, compared with a consensus analyst estimate of 10.4 percent, Shen said.

Shen predicted in a Nov. 28 report that Chinese stocks would rally in 2013, estimating that the A-share gauge would rise to 2,565 this year as the nation’s new leaders introduced measures to bolster the economy. China will actively promote urbanization as it fosters domestic demand, the Communist Party’s Politburo said Dec. 4 in its first assessment of the economy under new leader Xi Jinping.

‘Hold Up’

UBS AG’s China equity strategist Chen Li reiterated his forecast last week for an annual gain of 20 percent for the Shanghai Composite measure. Bank of America Corp. strategist David Cui said in a Jan. 25 briefing that Chinese stocks will “hold up fairly well” until March, when the new government may introduce new restrictions on the property market to restrain home-price gains.

The Shanghai Composite has been the worst performer among benchmark indexes in the G20 after Italy’s benchmark in the past three years, Shen said. The Shanghai index slumped 30 percent in the period through Jan. 4, 2013, according to data compiled by Bloomberg.

— With assistance by Allen Wan

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