Asset management firm Eurizon SLJ Capital has stated that Chinese stocks could rise by 10% by the end of the year, driven by supportive policies from Beijing and discounted valuations. In a report released on Monday, CEO Stephen Jen and economist and portfolio manager Joana Freire wrote that moderate regulatory policies have revived confidence, laying the foundation for 5% to 10% earnings growth. They noted that China has performed "quite well" in managing real estate deflation, with supply contracting and demand recovering, while substantial household savings provide new momentum for the stock market. The report indicated, "This year may be marked by a bottoming out of China’s real estate market and a surge in corporate profits driven by exports. China has finally reached a turning point." Eurizon expects that the end of the Middle East conflict will add further momentum to Chinese stocks, with the benchmark CSI 300 Index having already risen 1.3% this year. These comments highlight market optimism that China’s advancements in technology, a stabilizing real estate market, and recovering consumer spending will eventually restore economic growth to normal levels. According to Eurizon’s forecast, a 10% rise from Monday’s closing level of 4646.16 points would push the CSI 300 Index above 5100 points. Jen has long been a staunch bull on Chinese stocks. As early as September 2024, following government stimulus measures, he argued that investor allocations were too low. At that time, he described Chinese stocks as "extremely undervalued," and since then, the benchmark index has risen approximately 25%. Eurizon maintains that Chinese stocks remain discounted compared to their peers, citing the benchmark index’s price-to-earnings ratio of 18 times as a reference. The report’s authors added that China’s focus on supply chain self-sufficiency, aiming for dominance in artificial intelligence and advanced manufacturing technologies rather than pursuing short-term cyclical goals, makes the economy’s structural trajectory stronger than headline data suggests. Eurizon favors large-cap growth sectors, including IT, lithium batteries, humanoid robotics, and healthcare, while also expressing a positive outlook for Hong Kong-listed stocks amid a boom in IPO activity. The firm also believes that renminbi bonds stand out as a diversification asset in global portfolios. The report concluded, "Once the Middle East conflict subsides, Chinese stocks should rise alongside other global markets, with renminbi appreciation providing additional support."
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