Deutsche Bank chief economist for Greater China Jun Ma is cautious about China's economic growth until mid-2010, due to weaker external demand and lower domestic investment.
Economic growth in the world's third-largest economy will slow to 7 per cent in 2009 from 9 per cent last year on significantly weaker external demand and rapid deceleration in investments in real estate, manufacturing and mining, Ma said.
"Our analysis suggests that China's GDP (gross domestic product) will have a 'double dip', finally reaching its low point in the first-half of 2010," he said.
Earnings per share for Hong Kong-listed Chinese shares (H-Shares) will likely drop by 10 per cent to 15 per cent in 2009.
The H-share index will likely be range-bound in the next two quarters, but Ma said a substantial rally could occur in the second-half of 2009.
Ma outlined Deutsche Bank's recommended equity market strategy in China of staying defensive in the first half of 2009, and switching to a more aggressive asset allocation when signs of an end to analyst downgrades emerge. He said this is likely in mid-2009.
Deutsche Bank highlighted several themes which could provide investment opportunities during 2009 including healthcare, education, and online gaming, which could demonstrate significant resilience to the economic slowdown.
Certain steel, non-ferrous and property companies could be long-term beneficiaries of industrial consolidation.
Food and beverage, independent power producers and oil refiners could be beneficiaries of deflation, which is expected to be negative for other sectors of the economy including real estate.
China announced an $860 billion stimulus package last November to offset effects of the global economic downturn.
