Bank of America writes about its China outlook for the year ahead and says:
“We advise investors to stay vigilant, start defensive (high yield value) in early 2025, and add quality beta on major corrections and/or strong stimulus. If credit growth accelerates notably in 1Q25, China market could potentially see a more sustained rally in 2H25, in anticipation of the fundamental recovery in 2026.”
They note that China’s equities (MSCI Index) had a solid performance last year, gaining 16% in USD terms after a 50% decline over the prior three years. They note that the index’s forward P/E valuation recovered from 8x to 10x during 2024, still below its long-term average of 12x.
A key signpost they’re looking for is for credit growth to rise by 1 percentage point to 9%.
” 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.
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