Investor confidence in China’s earnings growth remains the missing factor driving continued gains for stocks in the world’s second-largest economy, which has been dogged by government stimulus and U.S. tensions. Aaron Costello, head of Asia at Cambridge Associates, said in 2019: “In order for Chinese stocks to significantly outperform, we need to see policy announcements that can truly alleviate deflationary pressures and promote a rebound in corporate earnings, both of which It all takes time. Beijing reiterated its plan to increase the deficit and expand economic support next year, but gave no details, and the CSI 300 index fell 1% last week, and fell 2.4% on Friday alone. China usually announces its plans at the National People’s Congress meeting in March. GDP target and fiscal plan. The stock price is now nearly 12% below the 52-week high set in early October. Costello said: “It is clear that China is preparing for more stimulus in 2025, which may be to offset the upcoming. Any adverse trade policies of the incoming Trump administration. Cambridge Associates is neutral on Chinese stocks, hoping to see more evidence of a growth pick-up. Earnings improving Despite broad pressures on the economy, sector-specific earnings are expected to improve. HSBC analysts said in December Chinese medical device companies’ profits are likely to expand next year, especially after the Ministry of Finance formulated a draft plan earlier this month that would make it 20% cheaper for local governments to buy domestic products than foreign products, a report by the Financial Times said. Although the public consultation period will end in early January, the implementation status is unclear: “As China’s hospital medical equipment procurement resumes from September, we expect China’s medical equipment industry to grow in 2025. rebound. “They predict that Shanghai-listed United Imaging expects profits to grow 46% in 2025, reversing this year’s losses. Snibo, which trades in the Shenzhen market, expects profits to grow 19%, and Mindray’s profits are expected to grow 15%. HSBC The bank rates the three stocks a buy. The new policies favoring domestic brands underscore China’s desire to reduce its reliance on U.S. exports and U.S.-made high-tech products, while the Biden administration restricts Chinese companies from buying advanced semiconductors made in the United States. President-elect Trump has vowed to impose a 10% tariff on Chinese imports across the board, but the exact nature of the next administration’s China policy is unclear. After ringing the opening bell at the New York Stock Exchange on Thursday, Trump also told CNBC. “We’re going to have a lot of negotiations with China,” said Jim Cramer. We have a good relationship with China. Trump said his previous stance on China was too harsh, while noting that talks with Chinese President Xi Jinping would help address U.S. concerns. On Thursday, Trump’s incoming press secretary, Caroline Leavitt, ) told Fox News that the president-elect has invited Xi to attend the inauguration on January 20. Beijing has not responded publicly, the Macro Research Council said in a report on Wednesday. The MSCI China Index has limited upside ahead of rising profits across the Chinese economy, the report said. Currently, foreign investors are only interested in trading around potential policy shifts in China, ignoring improving fundamentals, such as “Significant” improvement in future earnings for large online platform companies. “Improving bank earnings will be a key signal to lift China stock market positioning (from neutral),” the MRB report said, noting that “the most important indicator to lift China stock market positioning will therefore be a pickup in credit volumes.” Published on Friday Credit data for November fell short of expectations among economists polled by Reuters, with Citigroup analysts pointing to falling business demand as the main reason. Official data on retail sales, industrial production and investment for November will be released on Monday. Paul Christopher, global head of investment strategy at Wells Fargo Investment Institute, said, “While Beijing wants to stimulate more jobs, home purchases and consumer spending, (policymakers) also want to avoid encouraging highly indebted industries to take on more debt. .” said in an email. “This predicament may mean more limited support than in the past,” Christopher said. “2024 is a good example of how we look forward to the future.” He was referring to China’s stock market this year as policy support is forecast. up and down fluctuations. Looking ahead to next year, Christopher said he still favors U.S. large-cap stocks compared to other asset classes. That includes smaller U.S. stocks and stocks listed overseas, he said, noting that Wells Fargo “will take advantage of the rise in emerging market equities to reallocate to U.S. large-cap stocks.” The S&P 500 is set to rise nearly 27% in 2024 , expected to rise more than 20% for the second consecutive time. By contrast, China’s stock market rally this year could end years of decline. Hong Kong’s Hang Seng Index is on track to break four consecutive years of declines, with gains of more than 17% so far this year. After two consecutive years of declines, the Shanghai Composite Index is up 14% so far this year. The MSCI China Index, which tracks stock trading in Hong Kong and mainland China, has held on to more than half of its gains after surging more than 35% from a September low to an October high. “The market is unlikely to collapse,” Cambridge Associates’ Costello said in his 2025 outlook. “Downside risks in China appear contained, as monetary easing and actions to rein in local government debt risks should help prevent further stress,” Costello said. —CNBC’s Michael Bloom contributed to this report.
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