The research team at JPMorgan has revised their rating on Chinese stocks from “Overweight” to “Neutral” within their coverage of emerging markets and Asia ex-Japan, citing economic challenges and a complicated outlook ahead.
In their report to clients, released yesterday, they noted that assessing risks for Chinese stocks has become more complex due to a combination of global geopolitical tensions and domestic economic policies. The experts believe that the political landscape will significantly impact markets as the U.S. elections approach at the end of 2024, potentially increasing volatility in Chinese equities. They highlighted that any potential escalation in trade disputes between China and the U.S. could lead to notable tariff increases, ranging from 20% to 60%.
At the same time, China is facing significant difficulties in stimulating domestic economic activity amid a clear weakness in local consumption and declining confidence in the private business sector. JPMorgan experts expect China’s long-term growth trajectory to experience structural declines due to the global redistribution of supply chains, escalating trade disputes with the U.S., and persistent domestic economic challenges.
