Foreign Institutions' Favorable Views on China's Stock Market: Why?
Cai Enze
Recently, the international financial community has shown a significant turnaround in their attitude towards China's stock market, with many renowned financial institutions consistently issuing optimistic views.
Goldman Sachs pointed out in its latest research report that as DeepSeek rapidly rises, Chinese tech stocks are poised to experience a crucial revaluation period. Based on this, Goldman Sachs decided to maintain its overweight rating for the MSCI China Index and predicts that the index will likely rise by 14% this year; if market conditions become more favorable, the rise could be as high as 28%. Goldman Sachs also noted that under the backdrop of AI soft technology's rapid development, the A-share market will also benefit, particularly for those listed companies focusing on soft technology, whose stock performance is expected to surpass the average market level.
Deutsche Bank is equally optimistic about China's stock market, predicting that 2025 will be a key year for Chinese enterprises to make their international debut, when China's long-standing undervaluation problem will be fundamentally reversed. Deutsche Bank further analyzed that since 2024, the A-share and Hong Kong markets have officially entered a bull market cycle, which is expected to continue or even break through historical highs.
BlackRock Fund also recently publicly expressed its optimism about China's capital market for the next 12-36 months, particularly highlighting China's stocks and interest rate bonds as investment opportunities.
Foreign institutions' favorable views are not unfounded; they are backed by solid logic. From a valuation perspective, the current A-share market is extremely attractive. For example, the average valuation of the Shanghai-Shenzhen 300 Index is relatively low, while that of the S&P 500 Index is high. This significant valuation gap makes China's stocks shine like a gem in the global asset allocation landscape, attracting the attention of global investors.
From an industrial structure perspective, China's economy is rapidly upgrading and transforming, with new forms of production bringing fresh growth vitality to the market. For example, China's AI enterprises have made significant progress in technology research and development as well as scenario expansion. DeepSeek has emerged, breaking the US ChatGPT 4's monopoly. ByteDance's cloud model, relying on its strong language understanding and generation capabilities, has been widely applied in fields such as intelligent customer service, content creation assistance, etc., not only enhancing enterprise operational efficiency but also providing new investment opportunities for investors. In the robotics field, DJI Innovations, a globally renowned drone manufacturer, is constantly expanding its applications in agriculture, logistics, etc., showcasing strong market competitiveness and becoming a bright spot for China's technological innovation.
On the policy front, the Chinese government has provided comprehensive support for economic stability, growth, and market prosperity. In terms of stimulating consumption, local governments have issued consumer coupons to stimulate residents' consumption enthusiasm. Hangzhou's past promotional activities have brought vitality to the local consumption market by issuing coupons for dining, tourism, etc., promoting related industries' development.
Looking ahead, China's stock market has a wide range of development prospects. Goldman Sachs predicts that by year-end 2025, the MSCI China Index and Shanghai-Shenzhen 300 Index will rise by approximately 20% respectively.
Of course, we must also be clear-eyed about the fact that the market is not always smooth sailing. Geopolitical risks and economic games may exert certain pressure on China's export chain, while the pace of domestic recovery may be influenced by factors such as resident income growth. However, overall, China's assets are attractive, and the potential for China's stock market development remains huge.
In summary, foreign institutions' favorable views on China's stock market, coupled with China's strong economic strength, policy advantages, and market vitality, demonstrate the comprehensive representation of China's asset appeal. Investors should maintain a rational attitude, closely follow market developments, grasp investment opportunities, and achieve stable growth in market fluctuations.
This column article represents only the author's personal views