HSBC Global Private Banking views China’s recent policy changes, focused on technological innovation, consumption growth, and support for the private sector, as a potential driver for a positive re-rating of Chinese equities. The government’s 5% GDP growth target for 2025 aligns with its pro-growth approach.
Increasing domestic consumption is now a top priority for the year, while a renewed emphasis on AI investment aims to bolster China’s global tech leadership.
Encouraging Policy Developments
These policy developments are seen as encouraging for increased allocations in Chinese equities and investment-grade bonds, especially within the internet and tech sectors.
Analysts point to improving earnings expectations, an appealing risk-reward profile, and deep valuation discounts as factors that could support further gains.
This perspective highlights how recent policy decisions from Beijing may create opportunities in equities and fixed income. With an emphasis on supporting private enterprise, stronger consumer activity, and advancements in artificial intelligence, a more favourable view on valuations may develop. Beijing’s 5% economic expansion target reflects confidence in maintaining stable momentum, reinforcing a commitment to policies that aim to drive corporate earnings and broader market sentiment.
Consumption now takes priority, shaping strategies for both domestic businesses and market participants. Growth in discretionary spending could act as a stabilising factor for equities, particularly in sectors tied to consumer goods and retail services. Meanwhile, the renewed push into artificial intelligence suggests a long-term commitment to securing leadership in high-value technology industries. By directing investment towards innovation, authorities are steering capital into areas expected to define future productivity gains.
Market Sentiment And Valuations
Sentiment in equity markets often hinges on earnings visibility and the potential for upward revisions. Deep valuation discounts, as observed in certain sectors, may present opportunities for capital appreciation if confidence builds around earnings forecasts. Particularly in internet and technology-related shares, improving profit expectations set the stage for reassessments of fair value.
Investment-grade credit is another area drawing interest. With supportive policy measures and a stabilised macroeconomic strategy, high-quality corporate bonds could offer a reliable alternative for capital deployment. The perception that authorities will maintain an accommodative stance adds another layer of confidence in credit markets.
For those responding to these developments, the coming weeks will call for attention to shifts in corporate forecasts, sector-specific momentum, and the actual implementation of Beijing’s priorities. The extent to which improved earnings materialise will likely determine whether valuations adjust accordingly. A pragmatic approach means focusing on tangible changes rather than sentiment alone. Where earnings revisions follow policy direction, opportunities may arise.
