(Yicai Global) Jan. 12 -- After strong growth last year, China’s major stock indexes are likely to rise further this year, thanks to regulatory support and fewer investment alternatives for Chinese households, UBS Group said in its latest forecast.

The CSI 300 Index, which tracks the Chinese mainland market, may rise 13 percent, while the MSCI China Index and the Hang Seng Index could gain 15 percent and 9 percent respectively under optimistic scenarios, Wendy Liu, head of China strategy at UBS, said at the annual UBS Greater China Conference yesterday.

The Swiss bank’s benchmark position is that the CSI 300 Index will rise 3 percent, while its pessimistic scenario has the gauge dropping 5 percent.

Trading in mainland stocks has been vigorous since the beginning of the year. The daily turnover in Shanghai and Shenzhen has topped CNY1 trillion (USD155 billion) for seven trading days in a row, with indexes climbing. The Shanghai Composite Index closed up 2.2 percent today at 3,608.34, the highest level since December 2015. It has risen 3.9 percent so far this year, while the CSI 300 Index has gained 7.4 percent.

Households are expected to invest more in equities this year due to curbs on house purchases in big cities, a clampdown on shadow banking, and strengthened protection for smaller investors in the stock market, Liu said.

At the end of last year, households had assets worth about USD70 trillion, of which 17 percent was in stocks, funds and insurance products. That is forecast to rise to 19 percent this year.

Market Leaders

Leading companies are expected to continue to outperform the overall market, as they have strong management teams and tend to find ways to increase their market share when overall economic growth is relatively modest, Liu said. 

Also, backing for top firms from institutional investors will remain strong. In the data reported in the first half of 2020, half of the funds from institutional investors went into 92 mainland-listed stocks, Liu said. 

Chinese investors are still inclined to enter the market through funds, increasing the proportion of institutional investors in the market, and these institutions generally prefer stocks with stable growth and no particular risks, Meng Lei, a strategist at UBS Securities, said at the conference.

UBS also said it expects China’s economy to grow 8.2 percent this year, or 0.3 point more than the World Bank’s forecast. Consumption will jump 10 percent, and will be the main driving force for economic growth, UBS said.

With an expanding middle-class population, China’s total consumption will increase by USD8 trillion to USD9 trillion this decade, the largest increase in the world, creating big opportunities for companies and investors, UBS Chairman Axel Weber said at the conference.

Editor: Tom Litting