Barclays has identified a handful of European stocks poised to benefit from China’s anticipated economic stimulus measures. Investors have been closely watching for signs of government intervention as the world’s second-largest economy grapples with slowing growth and weak domestic demand. Earlier this week, the People’s Bank of China (PBOC) surprised markets by announcing plans to cut several rates , including that of existing mortgages. Mainland Chinese stocks jumped on the news. The investment bank suggested that China’s current economic climate resembles April 2024, when Chinese and China-exposed stocks experienced a significant rally. “Indeed there is renewed hope for stimulus (especially given the recent rate cut), positioning is quite light, and Fed’s 50bps cut could allow PBOC to ease more aggressively,” Barclays equity derivatives strategists led by Anshul Gupta said in a note to clients on Sept. 24. According to Barclays, U.K.-headquartered insurer Prudential , cosmetics giant L’Oreal , carmakers BMW and Mercedes , and miner Rio Tinto are among the top European stocks that could benefit from China’s stimulus efforts. All five stocks are also traded in the U.S. Those companies were picked based on their high exposure to the Chinese market, low volatility scores, significant upside potential, and lackluster performance year-to-date. For instance, Barclays’ price target for Prudential plc indicates a 114% rise in share price over the next 12 months. However, the stock has fallen by more than 20% this year, partly due to its exposure to China. China’s recent economic challenges have been evident, with the country experiencing its longest period of deflation since 1999. Economists, however, suggest that interest rate cuts alone may not be sufficient to revitalize China’s economy. Larry Hu, chief China economist at Macquarie, emphasized the need for additional fiscal support and efforts to strengthen the housing market. “The most likely path to reflation, in our view, is through fiscal spending on housing, financed by the PBOC’s balance sheet,” Hu added. — CNBC’s Michael Bloom and Evelyn Cheng contributed reporting.
