Invesco expects China's PPI to turn positive as early as March to April, urging to increase holdings in Chinese energy-related sectors

Invesco Asia-Pacific Global Market Strategist Zhao Yaoting believes that due to the upward revision of global oil price forecasts, the Consumer Price Index (CPI) and Producer Price Index (PPI) in China are expected to rise to around 1% this year, with PPI potentially turning positive as early as March or April.

He stated that China's actual risk exposure to the current global energy supply disruptions is lower than what its import data superficially indicates. About 30% of crude oil imports and only 6% of natural gas imports are transported through the Strait of Hormuz, meaning the direct impact of Middle Eastern supply shocks on China is relatively limited. Additionally, the rapid growth of China's renewable and alternative energy capacity, along with a decreasing structural dependence on oil and gas in its energy mix, can effectively resist imported inflationary pressures.

On the corporate side, with domestic demand continuing to recover recently and the initial effects of the "anti-involution" policy becoming apparent, more and more companies are beginning to be willing to raise prices. If demand-driven growth and supply-side adjustments can be sustained, it may mark the beginning of a re-inflation cycle.

Regarding the stock market, he believes that the current forward price-to-earnings ratio of the MSCI China Index is about 11 times, with investors holding low positions and market expectations being relatively moderate, which may create conditions for short-term upside and attract domestic and foreign funds seeking value investments. He recommends increasing holdings in China's energy-related sectors, especially renewable energy, electric vehicles, electric vehicle batteries, and grid infrastructure, as these are key areas in China's long-term energy strategy and are less susceptible to fluctuations in global commodity prices