(Yicai Global) March 7 -- China's digital economy is the most promising investing target in 2023 as the country is modernizing its industrial system, the chief economist of Haitong Securities said in an interview with Yicai Global.

Computers, electronics, and communication, three industries closely related to the three factors of the digital economy, namely data, computing power, and algorithms, will benefit from the development direction, Xun Yugen said yesterday.

The current valuations of these companies are still in the low or mid-range of their historic valuations during the past decades, despite the recent price surges, the expert at the Shanghai-based brokerage said. Moreover, since the profit growth rate of the sector is predicted to range between 25 percent and 30 percent, even if the current valuations are relatively high, there is still room to grow in stock price, he added.

As for the hot artificial intelligence sector, Xun offered a word of caution. It is necessary to identify the reason behind the skyrocketing stock prices, and investors can continue to follow the ones with real fundamentals but must avoid the ones that are rising because of speculation, the chief economist said.

Besides digital economy stocks, Xun is also bullish on stocks related to consumption. Consumption will recover as the pandemic becomes history, Xun predicted, adding that as a result, the business performance of the related listed firms will improve significantly this year.

Xun predicted that China's stock markets will welcome new waves of liquidity as over CNY1 trillion (USD144.1 billion) of private capital should flow into the domestic stock market this year via newly released mutual funds despite the reduced inflows of foreign funds.

For example, there are about 350 new public equity funds that either started the fundraising process or just got regulatory approvals as of now, Xun said. If taking the average scale of new funds of CNY1 billion in the past three months as a parameter, these funds alone could introduce at least CNY350 billion (USD50.4 billion) of liquidity to the market, Xun estimated. 

Moreover, as the big trend of Chinese people moving money from savings accounts to investment funds continues, China’s stock market should become one of the prime destinations for its residents' excessive savings, the financial expert predicted.

Editors: Tang Shihua, Emmi Laine, Xiao Yi