Bank of America writes about its outlook in China for the coming year and says:
“We advise investors to be vigilant, start protecting (high return value) in early 2025, and place quality beta on major corrections and/or strong incentives. 2H25, with a fundamental recovery expected in 2026.”
They note that Chinese shares (MSCI Index) had a strong performance last year, gaining 16% in USD terms after a 50% decline over the previous three years. They note that the index's forward P/E valuation recovered from 8x to 10x in 2024, still below its long-term average of 12x.
A key sign they are looking for is credit growth rising 1 percentage point to 9%.
“An acceleration in credit growth is a key thing to watch in 1Q25,” they write.
In terms of sectors, they like media and online retail (BABA) along with autos, IT hardware and semis.
