"Will the China Two Sessions Mark the Starting Point for a V-Shaped Recovery?"

Xi Jinping, President of China (Yonhap News)

[Asia Economy Reporter Junho Hwang] As China's Two Sessions begin on the 4th, the securities market's interest is heating up. The National Committee will start on the 4th, followed by the National People's Congress on the 5th, where the '14th Five-Year Plan (14.5 Economic Plan)' outlining the economic development blueprint for the next five years is expected to be approved. It is anticipated that this Two Sessions will mark a strong performance by leading companies driving domestic demand growth, market liberalization, and eco-friendliness.

Samsung Securities' Global Investment Strategy Team on the 2nd highlighted key points investors should watch during the Two Sessions: normalization of moderate stimulus policies (active fiscal spending, flexible monetary policy), the 14.5 Economic Plan and dual circulation policy (consumption stimulus, market liberalization), and three major reform policies (population, imbalance reduction, eco-friendly restructuring).

Among these, the approval of the 14.5 Economic Plan is expected, which is a mid-to-long-term growth strategy aimed at achieving a modernized nation by 2035, warranting close attention. The dual circulation strategy marks a significant inflection point, shifting from Deng Xiaoping's era 'international circulation' model (overseas market expansion and China's economic development) to 'domestic circulation' (growth centered on domestic demand and market liberalization), which is expected to have a substantial market impact. Xi Jinping's three major reform measures?population reform, imbalance reduction, and eco-friendly restructuring?are also key points to watch.

On the other hand, the economic growth target presented in the NPC work report may not be specified this year due to last year's COVID-19 pandemic impact or may be given as a broad range of 6-8%.

Jeon Jong-gyu, a strategic researcher at Samsung Securities, said, "Following the Chinese Lunar New Year holiday, with rising U.S. interest rates and adjustments in growth stocks, Chinese growth theme stocks have experienced price corrections, but a short-term rebound in growth stocks is being attempted ahead of the Two Sessions," adding that "the expected focus of the Two Sessions policy announcements is economic management."

Jeon recommended, "As an investment strategy after the Two Sessions, increasing the weight of Hong Kong stocks, cyclical stocks (automobiles, home appliances, industrial goods), and growth stocks (domestic demand, eco-friendly) is advisable," and forecasted, "COVID-19 stabilization will drive a V-shaped recovery in Chinese demand, and the 14.5 Economic Plan to be announced at the March NPC will support a strong trend among leading companies driving the dual circulation paradigm shift (domestic demand growth, market liberalization, eco-friendliness)."

Historically, the stock market has tended to rise after the Two Sessions. Since the financial crisis, in the 12 NPCs held, the Shanghai stock market performance one month after the sessions rose 9 times (a 75% probability). If compressed to the period since 2014, except for the 2018 U.S.-China trade dispute, stock prices have risen every time.