Analysts Pick SPA, AAV, AOT, ERW as China Recovery Winners

With the Chinese economy’s post-Covid rebound losing momentum, the People’s Bank of China cut its benchmark medium-term lending rates on Thursday for the first time in 10 months. 

According to the central bank on Thursday, the interest rate on loans totaling 237 billion yuan ($33.09 billion) from the country’s medium-term lending facility (MLF) to various financial institutions has been reduced by 10 basis points (bps) to 2.65% from the previous rate of 2.75%.

KGI Securities expects the global macroeconomy in 2H23 to be shaped by China’s economic momentum after a new round of interest rate cuts to boost a weak economic recovery. Stocks in the Thai tourist, consumer goods, and industrial property sectors are among the top 10 exposures to Chinese demand. 

Therefore, the brokerage firm choose the stocks under its coverage and picked out the following six companies as having good stories and potentially benefiting from the Chinese stimulus theme: Siam Wellness Group (SET: SPA), Asia Aviation (SET: AAV), Airports of Thailand (SET: AOT), WHA Corporation (SET: WHA), The Erawan Group (SET: ERW), and C.P. All Group (SET: CPALL).

KGI highlighted that the near-term outlook for these sectors seems promising, and earnings may rise if Chinese demand increases more rapidly than anticipated in the coming months.