LS "National People's Congress Meets Market Expectations... Chinese Stock Market Remains Attractive"

At the opening of the National People's Congress (NPC) of China amid concerns over the US-China trade war, it was assessed that the market's expectations were met with a 5% growth target, meaningful economic stimulus intensity, and a policy shift toward boosting domestic demand. The attractiveness of the Chinese stock market remains strong.

On the 6th, Baek Gwan-yeol, a researcher at LS Securities, stated in the report titled "NPC 2025, Overcoming Tariff Risks with Domestic Demand" that the NPC, which opened the previous morning, was "a meeting that fulfilled all three major market expectations."

First, Baek mentioned that Li Keqiang, Premier of the State Council of China, presented a 5% economic growth target for this year in the government work report, considering both domestic and international environments, interpreting it as "factoring in the impact of US President Donald Trump's tariff policies."

He explained the details, saying, "To achieve 5% growth, the fiscal deficit ratio relative to GDP was set at a record high 5% this year," and "special government bonds used during economic downturns will be issued amounting to 1.3 trillion yuan." This level was anticipated by the market ahead of this week's largest political event in China, the Two Sessions (Lianghui, comprising the NPC and the Chinese People's Political Consultative Conference).

In particular, the Chinese government reaffirmed expanding domestic demand as the top priority, as expected by the market. Baek predicted that "in a situation where the effects of infrastructure investment and net exports are limited, the government intends to overcome challenges through domestic demand," and that it will continue to focus on domestic demand recovery through interest rate and reserve requirement ratio cuts.

He also noted, "Although technology development, which was the top policy priority last year, was presented as a lower priority this year, the Chinese government's commitment to fostering advanced industries is expanding annually," adding, "At the NPC, AI+ promotion was emphasized again this year following last year. The government expressed its intention to foster future industries such as bio-manufacturing, quantum technology, embodied intelligence, and 6G."

Furthermore, Baek confirmed that "meaningful messages were also delivered regarding the Achilles' heel of the Chinese economy, namely local government finances and real estate issues," mentioning the announcement to transfer the collection of consumption taxes on certain items to local governments and plans to activate idle land and housing purchases to resolve unsold inventory.

He summarized, "Unlike last year's Two Sessions, there were no factors that disappointed the market this time." He analyzed that the Hang Seng Index in Hong Kong, sensitive to risks, closed up by over 3%, indicating that one uncertainty was resolved, and stated, "From a trading perspective, the attractiveness of the Chinese stock market remains valid."

The previous day, the Shanghai Composite Index and the Shenzhen Composite Index started the session weakly but closed slightly higher after the NPC confirmed messages to stimulate domestic demand. The CSI300 of mainland China also ended with a firm close. On that day, not only China but also Asian markets including South Korea, Japan, and Hong Kong generally showed an upward trend.