KB Securities announced that it is maintaining its overweight recommendation on Asian equities for July, with a preference for China followed by India. The recommended sectors include Chinese artificial intelligence (AI), high-dividend stocks, new consumption, rare earths, as well as Indian mid-cap and financial stocks.
On July 1, KB Securities researchers Park Suhyeon and Kim Seungmin stated in the 'KB Asia Equity Investment Strategy' report that they set the monthly trading band for the Shanghai Composite Index at 3,350 to 3,550 and for the Sensex Index at 79,000 to 85,000.
First, researcher Park noted, "Due to the inconsistent tariff policies of U.S. President Donald Trump, Asian countries are finding it difficult to prepare proactive responses." However, he also assessed that "China, which holds rare earths as strategic assets that can be used to pressure the United States, is able to negotiate more flexibly than India, and has relatively greater policy capacity to stimulate domestic demand."
Accordingly, there is an expectation that as the political schedule approaches in July and August, investor preference for Chinese stocks will strengthen. Park said, "In July, buying momentum in the Chinese stock market will likely concentrate on sectors with expectations for earnings improvement under a moderate economic recovery trend," adding, "As in the previous month, a bottom-up approach is necessary."
He suggested a preferred portfolio that includes advanced industry development strategies to be emphasized at the July Politburo meeting, the 15th Five-Year Plan draft to be unveiled at the Fourth Plenary Session, and the AI value chain (semiconductors, humanoids), high-dividend stocks, new consumption as a service sector development strategy, and rare earths as a theme of U.S.-China tensions.
By market, he expected positive momentum in the order of the Hong Kong stock market, the mainland stock market, and MSCI China. In particular, he forecast that the Hang Seng Tech Index would deliver higher returns than other indices by the end of the year. Recommended stocks and ETFs include TIGER China Hang Seng Tech and HWABAO Bank ETF.
Meanwhile, in India, where tariff negotiations with the United States are progressing more slowly than expected, a fiscal policy package to stimulate the economy is anticipated to be announced this month. Researcher Kim Seungmin said, "We expect the policy rate to remain unchanged in August," and explained, "The Indian government is likely to rely more on fiscal policy than monetary policy. Fiscal measures related to tax rate adjustments are expected to be announced at the July GST (Goods and Services Tax) meeting."
He identified the main agenda items for the GST meeting as the reform of the GST Cess (special surcharge), simplification of the GST rate structure, and reduction of tax rates, noting, "Consumer and industrial goods companies are expected to benefit." Specifically, he predicted that instead of abolishing the GST Cess, it would be converted into purpose-driven taxes such as health and clean energy taxes, while maintaining the current rates. He also expected that the 12% bracket in the five-tier GST rate structure would be eliminated, with most items consolidated into the 5% bracket for simplification. This, in turn, is expected to lower actual consumer prices and stimulate consumption.
Kim emphasized, "It is important to focus on the consumer and industrial goods sectors that can benefit from the effects of monetary policy in the first half and fiscal policy in the third quarter. As in the previous month, mid-cap stocks are expected to outperform large-cap stocks in July." He recommended a short-term strategy of increasing exposure to mid-cap stocks, and cited ISHARES MSCI INDIA ETF and KODEX India Nifty Midcap 100 as recommended stocks and ETFs.
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