Optimism Surrounding Chinese Stocks

Citi analysts remain optimistic about Chinese stocks, noting significant upside potential despite recent rallies to year-to-date highs.

Economic Stimulus Measures

Following the Chinese government’s announcement of economic stimulus measures, Citi’s China equity strategy team is sustaining its bullish outlook. They foresee additional gains as further stimulus packages are anticipated.

According to Citi, a RMB3 trillion consumption support package is likely to be introduced, augmenting the already positive effects of the recent stimulus.

Bullish Valuations

The analysts stated, “We remain bullish because Chinese equity valuations are still low compared to those of emerging market stocks, even after the past three weeks of share price increases.” This suggests that Chinese stocks have further growth potential, especially with ongoing economic support.

Citi has also adjusted its end-June 2025 targets for major Chinese stock indexes upwards by over 20%. Their projections are:
– Hang Seng Index: 26,000
– CSI 300: 4,600
– MSCI China Index: 84

This upward revision indicates strong potential for continued gains in the Chinese market.

Earnings Forecasts and Market Momentum

Additionally, Citi anticipates that the upcoming earnings season from mid-October to early November could lead to upward revisions in FY25 earnings forecasts, further enhancing momentum for Chinese equities. “We see potential for FY25 earnings forecasts to be hiked,” the report stated, suggesting the market is likely to continue outperforming in the short term.

Impact on Japanese Stocks

Citi also highlighted that the Chinese economic stimulus is generally positive for Japanese stocks, particularly for those companies with high exposure to China or strong correlations with Chinese stocks.