CHINESE stock investors can expect better performance next year as earnings growth picks up and MSCI Inc. includes the country’s equities in its benchmark indexes, according to the most accurate forecaster for 2017.

Zhu Bin, strategist for Southwest Securities Co., predicts the Shanghai Composite Index will climb to 3,700 by the end of 2018, implying a 13 percent gain from yesterday’s close, helped by an increase in mergers.

A year ago, Zhu successfully forecast a deleveraging campaign would weigh on the nation’s equities, picking 3,300 as his year-end target. The gauge, which has trailed most major global benchmarks this year with a 5.3 percent advance, closed at 3,280.46 yesterday.

“By now, companies would be more adapted to the slowing economy, where we expect accelerated industry consolidation to help drive stronger earnings and stock performance for market-leading firms,” Zhu said. “MSCI’s inclusion of some A shares will also offer strong support for stocks.”

Zhu’s target is more closely aligned with other analysts polled than last year, when he was the least bullish among participants. The median forecast among 13 analysts and fund managers for next year is 3,650.

Offshore Chinese shares are still likely to offer better opportunities, according to the poll. The Hang Seng China Enterprises Index, which has jumped more than 20 percent in Hong Kong so far this year, will rise 17 percent to 13,300 next year, according to the median estimate of 10 analysts. The MSCI China Index is estimated to gain 15 percent to 100 by end-2018.

Technological, financial and health care stocks are preferred by most analysts on the mainland and in Hong Kong for next year, while commodity, materials and mainland developers may underperform.

(SD-Agencies)