Uptrend ahead for A shares in H2

China’s A shares are poised for better days ahead and the weakness on Monday was only a temporary blip, experts said.

Equities had fallen on Monday after sentiment waned on economic uncertainties. However, experts still expect the A-share market to show robustness in the second half of the year.

National Bureau of Statistics data released on Monday showed GDP increased 6.7 percent in the second quarter compared to a year earlier. That was down slightly from the 6.8 percent year-on-year growth reported in the previous quarter.

The benchmark Shanghai Composite Index fell by 0.61 percent to 2814.04 points, with financial, real estate and airline shares leading the decline. The Shenzhen Component Index closed 0.10 percent lower at 9317.36 points. The ChiNext Index, which tracks China’s Nasdaq-style board of growth enterprises, declined by 0.10 percent to close at 1616.91 points.

China Pacific Insurance (Group) Co Ltd plunged by 2.94 percent. China Construction Bank Corp and Industrial and Commercial Bank of China Ltd all declined by more than 2 percent.

Communication equipment company shares posted gains after Chinese telecoms gear-maker ZTE Corp hit the daily increase limit. Hangzhou Freely Communication Co Ltd and Wenzhou Yihua Connector Co Ltd all saw their share prices rise by the daily maximum of 10 percent.

“China’s economic expansion slowed in line with expectations, and conditions will be weaker in the second half as China is carrying out deleveraging moves, and the trade conflict between the US and China is uncertain,” said Gao Ting, head of China market strategy at UBS Securities.

China’s economic fundamentals are better than in 2015 and 2016, and the yuan has got rid of unilateral fluctuations.” Dai Kang,

“But China’s A-share market will probably see an upward trend in the second half, as we believe the US and China will both be rational and China’s consumption market has huge potential,” Gao said.

Dai Kang, chief strategist at GF Securities, said foreign investors have shown strong interest in A shares as their valuations have been very attractive.

“China’s economic fundamentals are better than in 2015 and 2016, and the yuan has got rid of unilateral fluctuations,” Dai said.

Using stock connect programs, northbound funds — that is, international investors that target stocks listed in Shanghai and Shenzhen through Hong Kong — pumped 14.9 billion yuan ($2.2 billion) into the prized shares in the past month.

China’s sovereign wealth fund has expressed a desire to invest in the domestic market as stock valuations have hit multiyear lows, underscoring how coming home could bring new opportunities to boost returns.

The $941 billion China Investment Corp is seeking permission to invest in local shares and bonds, and has laid the groundwork for an application to the central government, according to Bloomberg.