Mainland China investors these days are often focused on how well U.S. stocks are doing — and bemoaning tepid performance at home. Sure, there are clear macroeconomic differences. And hardly any major Chinese stock has more than doubled in price this year , as Nvidia has. But a look at first-half performance shows that many China stocks still rose by double-digits, including a few artificial intelligence plays. Take, for example, the top three performers in the CSI 300, which tracks the largest names on the Shanghai and Shenzhen stock exchanges. Foxconn Industrial At the top was Apple supplier Foxconn Industrial Internet . Listed in Shanghai, it soared 81% in the first six months of the year. Bank of America Securities has a buy rating on Foxconn Industrial Internet (FII), and on June 26 raised its price objective to 33 yuan ($4.54), more than 20% above where shares closed Friday. “FII is a key iPhone casing supplier, and casing is also a high-margin business for FII,” the analysts said. “As we anticipate a better iPhone shipment cycle into 2025-26, we expect strong casing sales to support FII’s margin/earnings. Additionally, AI server remains intact and we remain positive on the long-term upside thanks to booming demand and faster GPU platform upgrade (sustainable demand, higher [average selling price]).” BofA expects 3% and 6% growth, respectively, in iPhone shipments this year and next. Avary Holding Shenzhen-listed Avary Holding ran a close second, jumping nearly 81% in the first half. Its three largest foreign institutional shareholders by market value are Standard Chartered Bank in Hong Kong, HSBC and JPMorgan, according to Wind Information data as of Thursday. Following Avary’s latest earnings in mid-May, Huatai analysts said that they expected the company to benefit from artificial intelligence-related demand in mobile phones and PCs. Huatai rates Avary a buy. “Avary boasts robust advantages in high-end [high-density interconnect circuit boards] and flexible printed circuit fields, positioning it favorably to capitalize on these trends,” the Huatai analysts said. “Moreover, the company has ventured into new domains such as automobiles and servers, fostering deeper collaborations with industry frontrunners and acquiring new clients.” Zhongji Innolight Ranking third in CSI 300 performance in the first half was Zhongji Innolight, which climbed 70%. Nomura rates Zhongji Innolight a buy and its analysts met with the optical communication company in late June. “Based on the company’s comments, we are increasingly confident about the buoyant infrastructure demand driven by generative AI training and inference, which benefits global leaders such as Innolight,” the Nomura analysts said in a June 23 report. “We think Innolight should be able to maintain its leading position in the global optical transceiver market, thanks to the company’s technology-focused management team, strong execution power, as well as solid relationship with the top AI infrastructure customers globally,” the analysts said. The CSI 300 index as a whole is down slightly year-to-date, hurt by slower economic growth and uncertainty about future earnings. That contrasts with the Nasdaq Composite’s first-half gain of 18% in the U.S. The broad mainland China stock market, measured in Class A shares, has underperformed over the past two years, said Wanda Wang, a research manager at Morningstar. That’s made it more difficult for local, actively-managed funds to outperform, resulting in an “influx of investments by institutional investors” into index-tracking ETFs. Capital controls make it difficult for many mainland China investors to access overseas markets. But financial institutions have created ways for them to participate in the trend, albeit at a distance. Take Invesco’s jointly managed ETF with Great Wall that tracks the Nasdaq. It’s seen so much buying that it’s trading at more than a 10% premium to its net asset value . That’s prompted the Shenzhen Stock Exchange, on which the ETF is traded, to repeatedly suspend trading, especially this past week. — CNBC’s Michael Bloom contributed to this report.
https://www.cnbc.com/2024/07/07/a-soaring-nasdaq-and-nvidia-in-the-us-make-chinas-stocks-look-worse.html
