Global banks turn more bullish on Chinese stocks

A growing number of global financial institutions have turned more positive on Chinese equities, raising market ratings and increasing exposure to Chinese assets as they expect improving fundamentals and policy support to boost market performance in the second half of the year.

In recent weeks, international financial institutions, including Citi, UBS and Standard Chartered, have released updated market outlooks on China, with some upgrading their views on A-share performance and raising earnings expectations.

Citi recently upgraded China equities from "tactical neutral" to "overweight" within emerging market portfolios, reflecting its more positive view on Chinese assets. The institution said Chinese equities could benefit from a broader global market recovery and an improved world growth outlook.

Standard Chartered has maintained an "overweight" rating on Chinese stocks, citing valuation advantages compared with major global markets, as well as continued progress in artificial intelligence and industrial upgrading.

UBS Securities also said technology and AI-related investments would remain important themes for China's stock market in the second half of the year.

"Tech could remain the main theme in H2 after short-term volatility," Meng Lei, China equity strategist at UBS Securities, said in a report released on Tuesday.

Meng said the technology sector should maintain robust earnings growth amid rapid global AI advances and China's policy support, while capital inflows from technology-related ETFs, mutual funds, margin financing and hedge funds could continue.

The investment bank also highlighted opportunities beyond AI, including sectors benefiting from AI-related capital expenditure, industries with improving earnings performance, and Chinese companies expanding globally.

Foreign investors' confidence in Chinese assets has also improved following recent breakthroughs in artificial intelligence, Yu Xiangrong, chief China economist at Citi, said.

"After the DeepSeek moment, overseas investors' confidence in China has indeed experienced a relatively significant boost. With the emergence of DeepSeek, I think investors have truly seen China's research capabilities, innovation capabilities, as well as the overall competitiveness of the economy," Yu said.

He said that while global investors' attention was largely focused on AI-related opportunities in markets such as South Korea and Japan in the first half of the year, Chinese assets could attract more attention if global capital begins to rebalance.

"If the single AI narrative begins to show cracks and international capital needs to reallocate and rebalance, then I think Chinese assets will instead attract more attention," Yu said.

The improving outlook comes as China continues to expand the opening-up of its capital market.

During a meeting with John Graham, president and CEO of Canada Pension Plan Investment Board, on Tuesday, China Securities Regulatory Commission Chairman Wu Qing reiterated China's commitment to maintaining the stable and healthy development of the capital market and welcomed international institutional investors to expand investment in China.

yinmingyue@163.com