Join the ranks of bullish on the Chinese stock market! Citigroup: There is still huge upside potential for growth

On Monday, in addition to Goldman Sachs, Citigroup also joined the chorus of bullish sentiment on the Chinese stock market. The bank's analysts remain optimistic about the Chinese stock market, stating that even after the recent sharp rebound, the market still has huge upside potential.

According to Citigroup, the government may introduce a 3 trillion yuan consumption support plan to further expand the positive impact of recent stimulus measures.

Analysts pointed out, "We remain bullish because after experiencing a rise in the past three weeks, the valuation of Chinese stocks is still low compared to emerging market stocks." They explained that there is still room for further upside in the Chinese stock market, especially as the economy continues to receive support.

Citigroup has raised its target for the CSI 300 Index to 4600 points by mid-next year, representing a potential increase of about 14% from the current level, and set a year-end target at 4900 points, up over 20% from the current level. The bank also raised its targets for the Hang Seng Index and MSCI China Index to 26000 points and 84 points by the end of June next year, representing approximately 13% and 12% upside from current levels, with year-end targets at 28000 points and 90 points respectively.

In terms of sectors, the bank upgraded its rating on Chinese consumer stocks from neutral to overweight and raised its rating on real estate stocks from underweight to neutral.

Furthermore, Citigroup believes that the upcoming earnings season from mid-October to early November may show companies raising their profit forecasts for the fiscal year 2025, providing further momentum for the Chinese stock market. The report states that this indicates the market may continue to perform well in the short term.

Regarding other markets, the bank stated that it believes "China's economic stimulus measures are generally favorable for Japanese stocks, especially for stocks with high exposure to China or highly correlated with Chinese stocks."

The Hang Seng Index continued its three-week rally on Monday, reaching a 32-month high and rising 9.3% since September 30. A-shares, which missed the rally, will reopen on Tuesday after the National Day holiday.

During the mainland China market closure, traders will shift their focus to Chinese-related futures products listed in Singapore and Hong Kong.

Since the start of the Golden Week holiday last Tuesday, the open interest in SGX FTSE China A50 Index futures has surged to a record 1.2 million contracts. At the same time, interest in similar contracts listed in Hong Kong has increased by 18%, although the total is less than 16,000 contracts, far from the peak, but it shows market enthusiasm.

Record high open interest in SGX FTSE China A50 futures contracts

"The strong trading volume reflects global investors managing their China exposure and adjusting positions before the reopening of the spot market," said Ding Meiyan, Head of Stock Derivatives Business at Singapore Exchange Group FTSE China A50 Index futures hit their highest level since January 2023 at the close on September 30th, following a series of stimulus measures announced by China to boost the economy, resulting in its best single-day performance in nearly 16 years. Since then, traders have been using financial instruments from around the world as alternative options for investing in China ahead of the resumption of trading in the mainland market on Tuesday