"Short-Term Investment Opportunities, Scenario-Based Responses: What Should Middle School Ants Check at the Zhongyanghui?"

If China reaffirms its domestic demand-centered policy stance at the Two Sessions (Lianghui: the National People's Congress and the Chinese People's Political Consultative Conference), the largest political event starting on the 4th, an analysis suggests that the adjustment flow immediately after the Two Sessions could become a 'short-term investment opportunity.' It is recommended to increase exposure mainly to Chinese tech stocks, which have recently shown a deep-sea-driven rally, while from a mid- to long-term perspective, attention should be paid to domestic demand-related products or exchange-traded funds (ETFs) tracking the large-cap benchmark CSI300 index.

Researchers Lee Juwon and Park Hyunjung of Daishin Securities stated in their report titled "Will There Be Another Surprise This Time?" on the 4th, "Typically, the Chinese stock market tends to undergo adjustments after the Two Sessions. Volatility is expected to increase," and they presented checkpoints for this year's Two Sessions and ETF response strategies by scenario.

First, Lee mentioned, "It is important whether the (economic stimulus) measures announced at this Two Sessions meet expectations," referring to targets including growth rate, willingness for monetary policy easing, wealth effects (additional policies related to real estate and stocks), consumption promotion, government infrastructure investment, and efforts to accelerate the structure of advanced industries.

He noted, "If the domestic demand-centered policy stance (of China) remains unchanged, it is necessary to consider the post-Two Sessions adjustment flow as a short-term investment opportunity." He also stated, "If the commitment to expanding domestic demand is reconfirmed at the Two Sessions, some uncertainties related to US-China conflicts may be alleviated. If China does not respond by allowing further yuan depreciation in addition to US tariffs but focuses on expanding domestic demand, the possibility of a trend-wise expansion of concerns related to US-China conflicts beyond the current level is limited."

The Donald Trump administration in the US is strengthening trade pressure by imposing an additional 10% tariff on China starting from this day. Amid this, the upcoming Two Sessions are evaluated as an event where the future direction of China's response to the trade war can be concretely gauged.

Lee emphasized, "Now is the time to focus on the short-term cycle," pointing out that the non-US economies including China are passing through a bottom phase, and that according to a Bank of America (BoA) manager survey, investment sentiment toward China has improved for the first time in a long while. He added, "Investment sentiment toward China is expected to remain favorable until the first half of the year," and judged, "In a phase where US stock performance is relatively weak in the short term, it is a time to expect asset allocation effects through China."

Researcher Park predicted that in the situation of increased volatility after the Two Sessions, scenario-based responses are necessary, and that the Chinese stock market, which has typically shown a temporary rebound followed by a decline, will show a different trend this year. He noted that Chinese tech stocks are leading the market's trend rise, with positive news for tech stocks such as DeepSea and BYD being announced consecutively.

He also emphasized, "With trust in China's advanced industries including artificial intelligence (AI) being restored and stock prices gaining momentum, any adjustment after the Two Sessions is an opportunity to increase exposure to Chinese investments," adding, "Since exports have become difficult to boost after Trump's inauguration, from the Chinese government's perspective, the stock market boost is a card that can be used to stimulate domestic demand, so unlike in the past, it is likely not to end as a one-time event."

Accordingly, Park presented ETF investment response strategies divided into Scenario 1, where stimulus measures exceeding expectations are announced at this Two Sessions, and Scenario 2, where stimulus measures meet or slightly fall short of expectations.

First, he said, "If stimulus measures exceeding expectations for domestic demand are announced, the stock prices of Chinese domestic demand-related companies, which have shown sluggish trends unlike tech stocks, could strongly rebound," recommending interest in products investing in the CSI300 index, which includes the top 300 mainland market capitalization companies.

On the other hand, if China's stimulus measures are at the current expected level or slightly below expectations, he mentioned that attention should be paid to Chinese tech stocks. He said, "After the adjustment, a rise centered on Chinese tech stocks similar to the beginning of the year is expected," and predicted, "Products investing in the MSCI China index, which has a relatively high weighting of Hong Kong tech stocks, will perform better than those investing in the CSI index."

Park emphasized, "Since AI momentum is expected to continue in the Chinese stock market throughout the first half of the year, a strategy to increase exposure mainly to Chinese tech stocks when adjustments occur after the Two Sessions is effective." He also mentioned that consumer sentiment could improve rapidly supported by the Chinese stock market, adding, "If a rebound centered on tech stocks occurs after the Two Sessions adjustment, even if portfolios are composed mainly of tech stocks, from a mid- to long-term perspective, it is necessary to pay attention to domestic demand-related products or ETFs tracking the aforementioned CSI 300 index."

Meanwhile, the Chinese People's Political Consultative Conference (CPPCC), a national advisory body, will hold its opening ceremony and first plenary session this afternoon at the Great Hall of the People in Beijing. The National People's Congress (NPC), equivalent to the national legislature, will open on the morning of the 5th. The economic growth target for this year, considered the biggest point of interest, will be disclosed through Premier Li Chang's government work report at the NPC.

This content was produced with the assistance of AI translation services.