The chinese equities could benefit if Donald Trump will reach the White House for the second time. This happens even though Trade friction between Washington and Beijing would intensifyaccording to a Japanese financial giant, and because investors could increase their exposure to these stocks in the world’s main markets such as Japan, USA and Europe.
This is stated in the latest report of Nomura Holdingsone of the main financial services firms in the Asian country, which suggests that this would occur in a context in which the Chinese government implements aggressive fiscal spending to accelerate the country’s economic recovery. Which would lead to investors, “although aware of the political risks“, to take advantage of the low price of many of these stocks, “which remain below their objectives set by analysts before the economic stimulus measures,” the document states.
This Thursday, it also emerged that China will almost double the share of loans for unfinished residential projects, bringing it to 4 trillion yuan (about US$562 billion), as announced by the Minister of Housing, Ni Hongat a press conference. However, for the most part, the official limited himself to reiterating measures already adopted by the government.
However, the country’s main indicators closed in red, so the market reaction reflects that authorities face considerable challenge to meet investor expectations and revitalize a weakening economic rebound. Well, skepticism is increasing, as Beijing seems to avoid launching a fiscal stimulus that lives up to the surprise caused by the central bank’s intervention at the end of September. Thus, this Thursday’s press conference was seen as another disappointment by investors. But for Nomura “curiously, There are implications for China-related stocks and a possible victory for Trump.”
Chinese equities under the scrutiny of analysts
The Japanese firm slips into the document that “even if the US-China trade conflict intensifies, Global investors could increase exposure to China-related stockswhile taking measures to avoid political risks between the two powers.” And it suggests that aggressive fiscal spending by the Chinese government would accelerate the recovery of that country’s economy.
The document asserts that when trade friction between Washington and Beijing intensified starting in 2018, “There was a negative correlation between the flow of funds from non-resident investors into the Chinese stock market and excess stock returns related to China, with the exception of the period since 2023, when concerns about the risk of economic recession began to outweigh concerns about political risks.”
Thus he maintains that one of the reasons why investors who They are optimistic about China may be more inclined to buy stocks related to that country now is that “many of these papers are still trading well below from where analysts had set their price targets before the Chinese government announced economic stimulus measures.”
In chat with Scope, Diego Martínez Burzacocountry head of Inviu Argentinaanalyzed part of the document and concluded that there are several factors “clue” to consider in that context. First, he slides Trump’s trade policy, which includes the implementation of tariff barriers. This situation, similar to that experienced during his previous mandate, “generates notable tension and volatility in financial markets“.
“In second place, a possible SEC resolution must be taken into account (US Securities and Exchange Commission) that could lead to the delisting of Chinese stocks due to the lack of transparency and inconsistency in the presentation of balance sheets,” warns Martínez Burzácoin relation to the standards required by the regulator for these shares to be listed on Wall Street.
Finally, the strategist suggests that it is crucial to consider China’s internal dynamics. “In response to economic challenges, The Chinese government launched an aggressive plan of fiscal and monetary incentives to stimulate the recovery of its economy“, he comments, adding that “it will be interesting to see how this impacts the market.”
The analyst recalls that in the last five years, Chinese stocks suffered a significant outflow of funds, “although in the last two months they have shown a slight rebound.” This context, explains the expert, suggests that it is a situation that deserves careful attention. In addition, he does highlight that if Trump returns to the presidency, the world could face an increase in geopolitical risk, accompanied by a more belligerent discourse. Therefore, it concludes that China-related stocks and assets “are not suitable for all investors; are more appropriate for a small portion of the portfolio of those with a very high risk profile“.
Cedears: Chinese stocks in the local market
The best positioned stocks for this “good“moment of chinese equity They are those that have to do with consumption, such as: Alibaba (BABA), JD.com (JD), and perhaps electric vehicle maker NIO (NIO). Likewise, and given the weight that China has in the EEM, an alternative would be to use said vehicle (which Cedear has) to bet on the recovery of China and -eventually- Brazil.
Tencent Holdings (TCEHY) stock also has a large influence on the video game industry, and is also driving its growth through significant investments in artificial intelligence. With more favorable monetary conditions in China, this trend is likely to continue.
Emilse Cordobadirector of Bell Bursátill, recommends “in a small percentage of the portfolio and for risky investor profiles due to high volatility” adding Alibabá, Bidú and JD. Thus, for the most savvy investors, there may now be a window of opportunity amid attractive valuations and signs of stabilization in China. And although structural challenges in that economy, such as debt and deflation, persist, current policies appear to seek a clear path to recovery.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
