China stimulus trade to pick up in stocks by late-Nov, JPM says

JPMorgan analysts said buying in Chinese stocks centered around Beijing’s plan for more stimulus was likely to resume later in November as the country outlines plans for more fiscal support. 

Chinese markets retreated in recent sessions after investors were largely underwhelmed by Beijing unlocking 10 trillion ($1.6 trillion) in new debt to support the economy, given that markets were holding out for more targeted fiscal measures.

But JPM said that signals from the government suggested such targeted measures were on the way, along with “likely supports to technological development and social security.” 

Trading in stocks around domestic stimulus favored high-beta domestic consumption, property, and financial proxies, JPM said, and was likely to pick up by late-November, especially as investors positioned for the Central Economic Work Conference in December. 

China’s Politburo is also set to meet in December. 

Still, with the new debt measures, JPM expects a marked improvement in China’s government debt by 2028, which also presents a better outlook for infrastructure stocks and software vendors to the government.  Trump tariff trade favors stocks with local exposure, defensives 

JPM noted that trading in Chinese equities around higher U.S. trade tariffs favored stocks with more local exposure, and was negative for high-beta export stocks, such as internet and consumer electronics stocks. 

President-elect Donald Trump has vowed to impose a 60% import tariff on all Chinese goods, which JPM expects to batter Chinese gross domestic product growth by 1.3 percentage points. JPM had trimmed its 2025 GDP forecast for China to 3.9% from 4.6%. 

Still, higher trade tariffs have historically benefited tech stocks exposed to localization, stock brokers, amid increased local trade, as well as low-yield defensives such as oil and defense stocks. 

JPM noted that Chinese earnings for the third quarter had so far held firm, bucking a seasonal trend for weakness. The brokerage also noted that property markets in tier-1 cities had started to improve.

Source: Investing.com