Stock rally likely to fade this year, says Deutsche Bank

SHANGHAI: A rally by China's stocks may fade from the second quarter as inflation triggers "significant policy tightening" by the government and the US economy weakens, Deutsche Bank AG said.

The MSCI China Index may still end the year 15 percent higher, Ma Jun, Deutsche Bank's Hong Kong-based China economist, said in a note to clients. The index tracking mostly mainland companies traded in Hong Kong jumped 59 percent last year after losing 52 percent in 2008.

"We see upside potential to the indices in the first few months, as the macro environment should remain favorable," Ma said. "CPI and asset inflation will likely pose major macro challenges and the resulting policy responses will cause market risks," he wrote, referring to the consumer price index.