高盛：会议关键的七月会议来了

Market Performance and Investor Sentiment - MSCI China rallied 32% from late January to mid-May but has since retraced 10% over the past 6 weeks, with small/mid-cap indices like CSI2000 losing around 20% year-to-date [2] - Offshore China equity reversed its losses in Q1 and became one of the best-performing equity markets globally in Q2, finishing the first half with moderate gains [2][4] - Investor expectations for additional policy easing and reform breakthroughs remain conservative, with tactical risk/reward setups for China equity appearing favorable ahead of the July policy meetings [2] - The 10% correction since mid-May aligns with historical norms for technical bull runs, with MSCI China experiencing at least a 5% pullback in 22 out of 23 historical rallies exceeding 20% [5] Policy Outlook and July Meetings - The Third Plenum of the Chinese Communist Party is scheduled for July 15-18, followed by the economically-focused Politburo meeting later in the month [6] - Policy focus is expected to be on containing left-tail risks and growing right-tail potential in the post-property era, with fiscal/tax and land reforms likely taking center stage [7] - Investors are disappointed with the policy intensity and momentum since the April Politburo meeting, with conservative expectations for additional stimulus and major reform breakthroughs [7] - The persistent weakness in the housing market may justify a shift to higher policy loosening, with untapped capacity from PSL and other fiscal/monetary facilities [11] Earnings and Valuations - MSCI China received its first monthly consensus earnings upgrade in May after 12 months of downgrades, signaling a potential end to the protracted earnings downcycle [16] - The report maintains an 8% EPS growth assumption for MSCI China in 2024, citing overly optimistic sell-side consensus forecasts of 12% and 14% for 2024 and 2025 [16] - MSCI China's forward P/E has declined from 10.6x at recent peaks to 9.2x, still above the January lows of 7.9x, with a macro-derived target/fair PE of 10.5x [19] - Earnings momentum has stabilized but remains concentrated in TMT and service-oriented sectors, with property and manufacturing sectors still facing headwinds [16] Sector and Market Strategy - The report retains a strategically positive view on A-shares, citing positive beta to domestic policy and liquidity factors, while tactically favoring H-shares for the next 3 months [24] - Allocation bias is towards non-tradable goods over tradable goods, with an Overweight stance on TMT and consumer service industries [24] - The AH rotation model suggests H-shares may outperform A-shares in the next 3 months, driven by likely Fed pivot in September and reduced valuations [25] - Infrastructure cyclicals are recommended in anticipation of re-accelerating government bond issuance in 2H24 [24] Shareholder Returns and Portfolio Construction - The theme of shareholder returns is expected to continue producing strong and stable returns, driven by policy push, low payout ratios, and record-high cash balances [25] - A China Shareholder Returns Portfolio is constructed, consisting of Stable Cash Cows, Dividend/buyback surprise candidates, and Select Central/Local SOEs [25] - The portfolio is expected to generate 3% shareholder return yields and 5% FCF yields in 2024, with a 16% cash/market cap ratio at median stock [25] - Chinese corporates have returned over RMB 2tn to shareholders annually for the past 3 years through dividends and buybacks [27]