China’s economic recovery is taking longer than projected, causing Citi analysts to revise their projection for a three-month stock market rebound.

Instead of June, Citi predicts the Hang Seng Index will reach 24,000 by the end of September, according to a research released Thursday. This is around 18% higher than present levels.

On Thursday, the Hang Seng Index finished at 20,331.20, up nearly 2.8% year to date.

“We expect [first-quarter 2023 corporate] results to be on the weaker side as post COVID recovery seems slower than expected,” the Citi report said. It said analysis of 2022 results of 316 Chinese companies found more misses than beats.

For the first two months of the year, China reported a slight comeback in economic growth. The country’s strict Covid limits were lifted in December.

Earnings from Chinese e-commerce behemoths JD.com and Alibaba also show that consumers continue to be frugal with their purchasing.

Tencent’s quarterly results, on the other hand, showed that businesses were increasingly prepared to spend money on advertising, particularly in the company’s expanding video accounts and e-commerce platforms.

Citi announced the addition of Tencent to its Hong Kong stock picks, joining retailer Topsports and state-owned Sinopharm Sands China. Chow Tai Fook and Air China remain on the firm’s stock picks list.

Analysts also pushed back their forecasts for a rebound in two major Chinese market indices by three months, to the end of September.

Citi has set a target of 4,500 for the CSI 300, which is nearly 9% higher than Friday’s closing of around 4,125.

Citi forecasts 78 for the MSCI China index. This is around 18% higher than current levels near 66.

Falling exports from slower growth in the United States and Europe, as well as a recession in the vast real estate industry, are dragging on China’s economy.

According to Goldman Sachs credit strategy analysts, the high-yield default rate for Chinese property developers would be 19% this year, according to a report released on Thursday.

That’s up from 46.4% last year, but it’s “still at an elevated level, reflecting the uncertain pace of recovery for the physical property market,” according to the research.

However, according to a quarterly citizens’s Bank of China survey released this week, more Chinese citizens want to buy houses again, with higher hopes that home prices will grow.

China’s box office has also begun to show indications of improvement.

According to movie ticketing service Maoyan, the animated picture “Suzume” became the highest-earning Japanese film in China this month, grossing more than 650 million yuan ($94.49 million), surpassing the previous first-place title “Your Name.” Both films were directed by the same person.

According to the data, “The Super Mario Bros. Movie” earned 32.3 million yuan on its first day in China on Wednesday, a local holiday. According to Deadline, this was the greatest opening for a Hollywood animation since the pandemic began in 2020.

More international films are now being shown in China, after officials only allowed a few titles to be shown during the pandemic.

On April 18, China will disclose first-quarter GDP and other economic figures.

Citi anticipates consumer discretionary and utilities businesses to have the highest growth in earnings per share among Hang Seng Index sectors in 2023, while energy and industrials are expected to drop.

(Adapted from CNBC.com)

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