Wall Street’s talking heads are saying that Donald Trump is poison for Chinese stocks. But are you sure you want to listen to them?
Hear us out: during Trump’s first term, Chinese markets gained over 50%. In Barack Obama and Joe Biden’s tenures, though, the gains were more meh than magnificent.
Sure, Trump’s trade wars made Chinese assets a hard sell. But recent signals suggest his second term might not be as apocalyptic as his campaign rants have hinted at.
In an unprecedented move, Trump’s inauguration will be attended by Chinese Vice-President Han Zheng. Chinese leaders have never attended past inaugurations –– typically the event is witnessed by ambassadors.
And it looks like the CEO of Chinese-owned TikTok, Shou Chew, may be there alongside the leaders of Big Tech. Mixed message, much?
Why even China, bro?
Let’s leave politics aside for a moment, tho. China isn’t the golden growth story it once was. Consumer spending’s sluggish, and US stocks — Big Tech in particular — wear the crown.
Dropping serious cash into Chinese stocks takes guts, but here’s why you probably could: they’re CHEAP. Chinese equities trade at a whopping 70% discount to their US counterparts.
The Chinese market is “tradeable” now compared to “overhyped and overpriced” US stocks, Ritesh Jain, founder of Pinetree Macro, tells MONIIFY. If the rebound comes, these prices could look like a steal.
Even Goldman Sachs strategists, led by Kinger Lau, are bullish and see the MSCI China and CSI 300 climbing about 20% by the end of the year –– better than the ~10% they expect for the US.
Read more: A China play minus the speeding fine
And China’s economy isn’t exactly a dumpster fire. GDP growth hit 5% in 2024, thanks to last-minute stimulus and an export boom. Projections for 2025 hover around 4.5% — not Titanic territory, but not inspiring either.
Policymakers are also hinting at market-friendly moves, like rate cuts and more liquidity. It’s not enough to set the market ablaze yet, but it’s a solid pregame if Trump ramps up tariffs.
So, YOLO?
“After the tech war and chip war, the next war you’ll probably see is the stock market war,” says DBS’s Joanne Goh.
What Goh means to say is that Beijing’s probably got a chest full of incentives to make sure its stock market doesn’t tank. If it pushes hard, Chinese giants like Tencent, Baidu and Xiaomi could shine.
If nothing else though, China’s stocks can be thought of as insurance against bubble risks elsewhere, according to Bank of America’s Michael Hartnett.
The bank recommends internet stocks in media and retail, plus financials like insurers and brokers.
That said, it’s not all dumplings and dragon dances.
Tariffs could still hit hard, and if China’s economy falters further, low valuations won’t save you. Volatility here isn’t for the faint-hearted — swings here can rival the craziest small caps.
And while stimulus has been a crutch since COVID-19, it’s a gamble. When policymakers pump, investors jump. When they don’t? They DUMP.
High cash levels in China also suggest that local confidence in Chinese equities remains shaky. HSBC notes cash holdings have jumped 75% since 2020, and while economic data shows “marginal improvements,” it’s not enough to flip investor sentiment.
But look… if you’re tired of US Big Tech hype and are feeling bold, Chinese stocks might just be your YOLO play. But don’t expect smooth sailing — this market takes nerves of steel.
Edited by Thyagu Adinarayan and Ankush Chibber. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com