Intl institutions upgrade ratings of Chinese companies, driven by industry growth

Major International institutions have upgraded their ratings of multiple Chinese companies, with the target prices of some companies doubling and some receiving an "overweight" rating for the first time. Analysts said that this showcased global investors' growing confidence in China's emerging and cutting-edge industries.

As one of the latest examples, CITIC CLSA (formerly known as Credit Lyonnais Securities Asia) on Monday issued a report raising Tencent's target price to HK$710 ($90.50), anticipating strong growth in gaming and advertising in the second quarter, while maintaining a "highly confident outperform the market" rating.

CLSA attributed potential advertising revenue growth to upgrades in advertisement technology, video accounts, mini-programs, and search business, while cloud revenue is expected to resume double-digit growth due to robust artificial intelligence demand.

BofA Securities doubled the target prices of two Chinese companies on Monday. The rating for Ganfeng Lithium Co was upgraded from "underperform the market" to "buy," with the target price rising from HK$17 to HK$35. BofA Securities also upgraded Tianqi Lithium's rating from "underperform the market" to "buy," increasing the target price from HK$21 to HK$50.

On the same day, Citigroup released a report stating that benefiting from high-capacity utilization driven by domestic foundry demand, Semiconductor Manufacturing International Corp (SMIC) and Hua Hong Semiconductor reported revenue and gross margins for the second quarter that exceeded market expectations.

SMIC forecast a 6 percent sequential revenue increase for the third quarter of 2025, while Hua Hong Semiconductor forecast an 11 percent increase, indicating a gradual recovery in semiconductor demand, according to Citigroup. Citigroup raised its target price for Hua Hong from HK$39 to HK$45.

Morgan Stanley also issued a report, giving Geekplus, a mobile robotics technologies provider, an "overweight" rating for the first time and a target price of HK$21.60, citing strong growth potential in the autonomous mobile robot market.

In late July, Geekplus announced the establishment of an embodied intelligence subsidiary, which will enhance its warehouse automation capabilities and competitiveness, said Morgan Stanley.

Apart from specific companies, institutions were also upbeat on several industries in China.

For example, on Thursday, Fitch Ratings said that China's cement sector is poised for accelerated consolidation, while expecting the industry to return to profit before tax in the first half of 2025. Guidance released by several listed cement producers indicates the improvement in profitability seen in the first quarter of 2025 is set to continue in the second quarter, Fitch Ratings said.

Yang Delong, chief economist of the Shenzhen-based First Seafront Fund, told the Global Times on Monday that as China's steady economic growth policies take effect and economic data further improve, opportunities for increased foreign capital inflows into A shares and Hong Kong stocks are growing.

"From a medium- to long-term perspective, global capital rebalancing is likely to create new opportunities for A shares and Hong Kong stocks, potentially attracting more foreign investment," said Yang.