Missed China's reopening rally? Bank of America names global stocks to ride the second leg

Published Wed, Dec 14 20227:57 PM ESTUpdated Thu, Dec 15 20226:49 AM EST

Investors will have a second opportunity to take part in the stock market rally after China announced a relaxation of Covid-19 restrictions, according to Bank of America. The Wall Street bank said Chinese stocks had risen substantially after Beijing's "credible policy easing actions" triggered a risk-on move in markets. The bank said it was now seeing "nascent signs" of fundamental earnings data turning positive for stocks, which is likely to set off the second leg of a market rally. "We observe green shoots of recovery in high-frequency data, especially in re-opening sectors," the Bank of America's analysts said in a note to clients on Dec. 14. "A study of past easing cycles suggests a long, and strong runway ahead for earnings recovery." The bank named 30 global stocks exposed to China to leverage the "cyclicals and re-opening" theme. The 12 stocks listed below are among those with the biggest positive upside to stock prices, are buy-rated by Bank of America, and are expected to see growth in earnings per share. Topping the list is Tokyo-listed Renesas Electronics . Shares of the chip maker are expected to rise by 56% within the next 12 months, according to the median average of analyst price targets. According to Bank of America, nearly a quarter of the company's revenue comes from sales to China. The investment bank's analyst also said they had confidence in the company's management to keep up with any upcoming downturn in the sector. "Renesas is grasping details on inventory levels by scrutinizing conditions at end-customers, sales channels, etc. That is facilitating skillful adjustment of operating rates," the analysts said in a separate note to clients on Nov. 22. "We expect the market's confidence in Renesas to rise if it successfully manages inventory and margins during the market downcycle this time." Other stocks featured in the list include South Korea's battery and component makers Samsung SDI , LG Chem and LG Energy Solution. These companies earn 16-28% of their total revenues in China, the world's largest electric vehicle market. Samsung SDI as well as Renesas Electronics are accessible to investors in the U.S. and Europe through the Fidelity Electric Vehicles and Future Transportation ETF. — CNBC's Michael Bloom contributed reporting