Dah Sing Bank Research Department: Mainland lowers growth target to 4.5% to 5%, maintains Hong Kong stock outlook at "neutral"

Dah Sing Bank's Economic Research and Investment Strategy Department published an investment hotspot commentary stating that Premier Li Qiang delivered the government work report at the National People's Congress, proposing this year's economic growth target set at 4.5% to 5%. This is the first time since 2023 that the economic growth target has been lowered, and it is also the most moderate growth target since 1991; the inflation target remains around 2%.

This year's budget deficit rate for the mainland is maintained at around 4%, the highest level since the fiscal and tax system reform in 1994; the new quota for local government special bonds is 4.4 trillion yuan, which is the first time since 2022 that it has not been increased. The policy will continue to implement a more proactive fiscal policy and a moderately loose monetary policy. Li Qiang indicated that the main consideration for proposing the above targets is to leave room for structural adjustment, risk prevention, and reform in the first year, laying a solid foundation for better development in the later stage; he also stated that efforts will be made to push the overall price level from negative to positive.

Dah Sing Bank believes that the overall tone of the report indicates that there is limited room for further expansion of stimulus measures in the mainland this year. Faced with a still sluggish real estate market, any fiscal policy aimed at stimulating consumption may not necessarily bring about a reversal of the situation, and the rising debt levels in recent years also constrain the scale of stimulus measures due to limited fiscal resources. The ultra-long-term special government bonds arranged to support large-scale equipment upgrades and the replacement of consumer goods have been reduced from last year's 500 billion yuan to 450 billion yuan. Although the report mentions increasing counter-cyclical and cross-cyclical adjustment efforts and the need to flexibly and efficiently use various policy tools such as reserve requirement ratio cuts and interest rate reductions, the tone does not suggest a more aggressive monetary policy than last year. The bank anticipates that this year there may only be one interest rate cut and one reserve requirement ratio cut at most, similar to last year's extent.

Dah Sing maintains a "neutral" view on Hong Kong stocks, with artificial intelligence-related applications expected to boost corporate profit prospects; however, in the short term, the market may continue to fluctuate due to the U.S.-Iran conflict. If the Hang Seng Index falls below the psychological level of 25,000 points again in the short term, it may test the 24,000-point level, with resistance at the February high of 27,400 points