Citibank: Lowers Hang Seng Index target to 22,000 points by the end of this year, expecting "Two Sessions" to serve as a catalyst.

According to Citigroup's report, the downgrade in Hang Seng Index target reflects slower earnings growth per share. Citigroup has lowered the mid-year and year-end targets for the Hang Seng Index to 21,000 points and 22,000 points respectively. Citigroup has also lowered the forecasted earnings growth per share for the Hang Seng Index in 2025 to 5.1%; and for the MSCI China Index to 9%. According to Citigroup, Chinese stocks are trading at a discount, with the expected P/E ratio for the Hang Seng Index at 8.8 times and the P/B ratio at 1 times, which is below historical averages by 1 to 2 standard deviations. It is expected that China is seeking stable economic growth, depending on external tariff impacts and mainland stimulus measures. Citigroup expects US tariffs to be gradually implemented starting in the second quarter of this year, with an effective increase of 15 percentage points, which could reduce Chinese exports by 6% and the economy by 1%. Citigroup suggests that in the face of risks such as external tariffs, investors should adopt a barbell strategy, with one end consisting of high-growth stocks and the other end consisting of high dividend-paying companies for optimal results. Preferred stocks in Hong Kong include Tencent (00700), Ctrip (09961), Xiaomi (01810), ASMPT (00522), BYD Company (01211), AIA (01299) and Haier Smart Home (06690), while also including China Merchants Bank (600036.SH) and Ping An Insurance (601318.SH) on the buy list for A-shares, as it is expected that Chinese monetary easing may favor high-dividend companies in A-shares among mainland investors. However, Citigroup still believes that the Two Sessions held in March may provide five catalysts, including promoting domestic consumption, accelerating new product development, undertaking structural SOE reforms, and relaxing policies to boost the tourism industry. Citigroup now expects China to cut interest rates by 50 basis points this year.