A series of optimistic news has emerged recently!
According to recent reports, the Norwegian Sovereign Wealth Fund, valued at $1.8 trillion, has advised investors to sell American technology stocks while increasing their investments in Chinese assets.
Similarly, other renowned institutions such as Goldman Sachs and JPMorgan have collectively expressed optimism about the Chinese stock marketGoldman Sachs' economic team anticipates that the MSCI China Index and the CSI 300 Index will both rise by around 20% by the end of 2025. In addition, JPMorgan has projected a turnaround in China's stock market by the end of January this year
Advertisements
UBS Securities has also recently stated that the overall corporate profitability of A-shares will significantly improve by 2025.
On January 22nd, as a reaction to this optimistic news, the FTSE China A50 Futures Index experienced a sharp rise, peaking with a gain of 1%. Meanwhile, the offshore yuan saw a surge against the US dollar, climbing from 7.2899 to 7.2652 at one point, representing an increase of nearly 250 basis points.
Foreign Investment Giants Optimistic about Chinese Assets
On January 22nd, Nicolai Tangen, the head of the Norwegian Sovereign Wealth Fund, stated that investors willing to act contrarily in the coming months should consider selling American tech stocks and private credit while boosting their investments in Chinese assets.
“The best approach is always to go against the crowd,” Tangen remarked during a break at the Davos Forum on Wednesday
Advertisements
“What should be done now? Well, if one is to act contrarily, that would mean selling American tech stocks, buying Chinese assets, selling private credit, and investing in things that are undervalued.”
Tangen admitted that this strategy is “very, very difficult to execute because if you operate in reverse and deviate from your benchmark, there will be periods of underperformance, leading others to question your sanity.”
Tangen joined Norges Bank Investment Management, the official management company of the Norwegian Sovereign Wealth Fund, in September 2020. Throughout his tenure, he urged his traders to think long term and warned that inflation could continue to weigh down returns in the coming years.
The Norwegian Sovereign Wealth Fund is among the world's largest funds, currently amassing $1.8 trillion in assets
Advertisements
It holds nearly 1.5% of shares in publicly listed companies worldwide, which translates into stakes in about 9,000 companies globally, earning a fraction of the profits from these firms annuallyAdditionally, the fund owns hundreds of buildings across major cities, generating rental income, and earns stable revenues through loans to governments and corporations.
On Tuesday, during a media interview, Tangen pointed out that tariff-driven inflation is one of the major market risks for 2025. “I don’t think I should offer any advice to the U.S., but looking at the risks facing the financial markets, I believe inflation is certainly one of them, and it’s all driven by tariffs,” Tangen explainedHe added, “Many of the proposals currently put forth in the U.S
- 18% Annual Return
- U.S. Stock Market Appears Overvalued
- Bank of Japan Raises Interest Rates on Friday
- A-Shares Poised for Major Shift
- Rising Pressure on Yen’s Decline
could potentially trigger inflationThey could lead to more inflationThe supply of labor might decrease, tariffs could increase – all pushing inflation higher, meaning it’s not going to go down.”
Tangen also outlined key risks facing the U.Sstock market, including rising long-term interest rates, high government debt levels, and geopolitical tensionsHe noted that the U.Sequity market is heavily focused on large technology companies, which he stated have “never been this large.” However, he indicated that “purely financially,” for many U.Scompanies, a new president’s arrival could be “very positive.”
It is important to note that the optimism for Chinese assets comes from more than just the Norwegian Sovereign Wealth Fund
Recently, renowned foreign institutions such as Goldman Sachs and JPMorgan have released reports expressing positivity around China’s capital markets in 2025.
Goldman Sachs’ economic team has predicted that the MSCI China Index and the CSI 300 Index will rise by about 20% by the end of 2025, stating, “Although the market performed poorly at the beginning of the year, given that returns are still attractive relative to risk, we maintain our overweight recommendations for A-shares and offshore Chinese stocks.”
Goldman Sachs’ Chief China Equity Strategist, Liu Jinjian, along with his team, expects that by 2025, the earnings growth of the MSCI China Index and the CSI 300 Index will reach 7% and 10%, respectively, with the implied reasonable price-to-earnings ratios reaching 11 times and 14 times.
Similarly, UBS Securities Chinese Equity Strategist Meng Lei stated that despite some fluctuations at the beginning of 2025, the fundamental factors have not changed
He anticipates a significant improvement in the overall corporate profitability of A-shares, with the earnings growth for the CSI 300 Index expected to be around 6%.
Moreover, Ma Lei, Chief Investment Officer for Invesco in mainland China and Hong Kong, indicated in the 2025 Investment Outlook that there will be substantial growth potential for Chinese stocks in 2025, expressing an optimistic outlook for the next twelve months of development in the Chinese stock marketAs corporate fundamentals improve, anticipated revenue reversals could propel potential growth in equity returns and upward revisions in profit forecasts, thereby bolstering investor confidence.
A-shares Receive Major Positive News
On the afternoon of January 22nd, A-shares welcomed a significant piece of good news.
The announcement covers five areas: First, enhancing the investment proportion and stability of commercial insurance funds in A-shares
Second, optimizing the investment management mechanisms for the National Social Security Fund and basic pension insurance fundsThird, improving the market-oriented investment operation level of enterprise (occupational) annuity fundsFourth, increasing the scale and proportion of equity fundsFifth, optimizing the capital market investment ecosystem.
These proposals primarily aim to guide medium to long-term funds such as commercial insurance funds, national social security funds, basic pension insurance funds, enterprise (occupational) annuity funds, and public funds to increase their market investments.
Yang Delong, Chief Economist of Qianhai Kaiyuan Fund, noted that the release of these proposals undoubtedly reassures the market
Following a certain degree of adjustment in the market recently, attracting patient capital through guiding medium to long-term funds into the market will contribute positively to boosting investor confidence and willingness to enter the marketThe Spring Festival is approaching, and historically, the period following it often triggers a spring rally, a seasonal characteristic of A-sharesIt is advisable to maintain confidence and patience, strategically investing in quality stocks or funds during market adjustments to seize opportunities in the next round of market movements.
Furthermore, securities firms have indicated that the barriers preventing medium and long-term funds such as insurance and bank wealth management from entering the market are gradually being cleared
The main barriers to the entry of medium to long-term funds include three aspects: first, price volatility is a normal market condition but the performance evaluation period is too short; second, the capital market's investment ecology needs to be improved to attract long-term investments; third, insurance companies face regulatory pressures around solvency.
The latest released implementation plan specifies that state-owned insurance companies will undergo a comprehensive long-cycle assessment of their business performance beyond three years, while the National Social Security Fund and basic pension insurance fund will be evaluated based on operations extending over five yearsAdditionally, it encourages listed companies to increase share buybacks and implement a policy for quarterly dividends, which is significant in clearing the first two barriers
In response to the third barrier, regulatory authorities have explored beneficial measures by lowering equity risk factors, and further policy optimization is anticipated.
The institutions involved believe that promoting the entry of medium to long-term funds will enhance the internal stability of the marketIn a controlled risk environment, these funds may increase their equity assets to cope with a low-interest-rate landscapeCurrently, the allocation ratio of equity-based investments (stocks + funds + long-term equity investments) among insurance funds stands at 20.4%, with a solvency ratio of 197.4%, indicating a permitted ceiling of 25%. Given that publicly listed insurance companies generally maintain solvency ratios above 200%, there is room for growth in both equity scale and actual ratios.
The inflow of medium to long-term funds will help optimize the investor structure, foster the principles of value investment and long-term investment, reduce market volatility and speculation, ultimately enhancing investor confidence and improving the market’s resource allocation function
With external uncertainties gradually addressing and internal responses becoming evident, the influx of new capital is expected to energize market activity again.
Moreover, on January 20th, a meeting chaired by Liu Kun, Secretary of the Party Leadership Group of the Social Security Fund, was heldThe meeting emphasized that it’s essential to think and plan for the development of social security funds from the perspective of the overall party and national strategy, prudently and steadily conducting fund investment operationsStakeholders should always be mindful of the “national interest” and actively integrate into the major national strategies, playing a vital role in maintaining stable capital markets and promoting high-quality economic and social development.