List the three major logics, Deutsche Bank believes that the Chinese stock market is reversing rather than rebounding, and the Hang Seng Index will hit a new high in this round

In this round of bull market in China, is it a structural adjustment or a short-term market rebound?

Deutsche Bank has provided an answer in its latest research report: The current market rebound is not just a short-term short covering, but a change in trend.

Deutsche Bank analyst Peter Milliken stated in the report on the 21st that the current Chinese stock market is decoupling from GDP, and economic growth is no longer the sole factor driving the stock market rise. Additionally, with a massive cash reserve of $6.5 trillion in the Chinese market waiting to be unleashed, coupled with low valuations, Hong Kong stocks are expected to rebound in this round of bull market.

Based on these three main points, Deutsche Bank holds an optimistic view on the outlook of the Chinese stock market. Deutsche Bank predicts that with the inflow of global funds and the recovery of investor confidence, the Hang Seng Index is expected to usher in a strong bull market, possibly even breaking through 33,000 points in this round of rebound, setting a new historical high.

Decoupling of Stock Market from GDP, Economic Growth is No Longer the Sole Factor

Deutsche Bank's analysis points out that the correlation between the Chinese stock market and economic growth is weakening. The report shows that despite China's GDP growth significantly outpacing that of Western countries, often being 2 to 3 times higher, the stock market performance does not directly reflect this growth.

Taking the CSI 300 Index as an example, in the past 10 years, China's GDP has grown 10 times, while the CSI 300 has only risen 4 times.

This decoupling of economic growth from stock market performance is a significant feature of China's capital market.

Massive Cash Reserves Waiting to be Unleashed, Abundant Liquidity in the Stock Market

Deutsche Bank points out that since 2020, Chinese households have accumulated $6.5 trillion in deposits. In the future, these huge funds are expected to enter the market, whether through consumption or investment, providing significant liquidity support to the stock market.

With more funds flowing into the stock market, especially when deposit rates are maintained at around 1%, the likelihood of funds shifting from banks to the stock market increases.

Deutsche Bank also emphasizes that the global capital allocation to the Chinese stock market remains relatively low, giving the Chinese market significant growth potential.

Furthermore, further policy relaxation will promote the improvement of corporate profitability. Deutsche Bank points out that many listed companies in the current Chinese market have ample cash reserves, especially the major constituents of the CSI 300 and Hang Seng Index. This means that these companies have the ability to conduct stock buybacks during market fluctuations, providing further support to the market.

Hang Seng Index is expected to rebound in the bull market

The report shows that in the past fourteen years since 2010, the Hong Kong stock market has only experienced double-digit growth twice, with most years seeing declines or mediocre performance. Therefore, the valuation of the Hong Kong stock market is significantly undervalued, accumulating huge potential for rebound.

Furthermore, Deutsche Bank pointed out that the outflow of U.S. capital also contributes to the continued rise of the Hong Kong stock market. Currently, the market value of the U.S. market is 2.3 times its GDP, the second highest level in history. Over time, U.S. capital will diversify as market value becomes more aligned with GDP share. For example, in the late 1960s, the U.S. market was highly concentrated, and then capital began to flow to other regions such as Japan, driving economic growth in those areas.

Therefore, Deutsche Bank predicts that the highly concentrated state of the U.S. market will gradually change, with capital flowing to other regions, especially Asia. This will bring new development opportunities to the Hong Kong market