Will there be a major reversal in the Chinese stock market? Wall Street's two major investment banks are targeting "late January to February"!

At the beginning of 2025, the US stock and bond markets seemed to have "returned to the pre-liberation era overnight": the S&P 500 index wiped out all gains since the US election, hitting a new low since November 5 of last year; the US bond market faced a sell-off, with the yield on the 10-year US Treasury approaching the 5% peak. Even under the influence of a strong dollar and high US bond yields, the Chinese stock and bond markets were also impacted.

However, the latest views from JP Morgan and Bank of America both suggest that as Trump's policies towards China and China's responses become clearer, and the decline in US stocks may force Trump to make concessions on tariffs, this will drive the Chinese stock market to experience a major reversal around the end of January or February.

Analysts from JP Morgan, including Wendy Liu, wrote in a report on January 10 that as Trump's policies towards China and China's responses become clearer, the Chinese stock market is expected to see a reversal around the end of January. Factors such as consumption during the Spring Festival, macroeconomic data for January and February to be released in mid-March, quarterly performance reports from listed companies for the last quarter of the previous year, and a new round of stimulus policies may all impact the stock market.

Bank of America's well-known strategist Michael Hartnett also expressed a similar view, believing that the decline in US stocks will force the Trump administration to make concessions on tariffs, and February or March will be a good time to start going long on US bonds and Chinese stocks. He also believes that increasing exposure to the Chinese stock market and other international markets is the best strategy to hedge against US stock risks.

Additionally, Hartnett stated three reasons supporting this view:

1. The "panic" of economies such as Europe and Asia regarding monetary policy: In response to major economic challenges such as recession and inflation, central banks may adopt unconventional policy measures, which could exacerbate global market volatility and lead to a reassessment of the Chinese stock market, thus creating reversal opportunities.

2. The recent breakthrough in copper prices reflects a recovery trend in Chinese consumption (on January 9, NYSE copper futures surged, approaching the record during last year's historic short squeeze in the global copper market).

3. If the Trump administration chooses to make concessions on tariffs, the next focus may shift to domestic tax policies. This could help ease tensions in international markets and may have a positive effect on global stock markets.

Regarding the earlier mention of the "impact of a strong dollar and high US bond yields," analysts Lu Zhe and Zhang Jiawei from Soochow Securities noted in their research report that the fundamental situation in February may drive the dollar index and US bond yields lower:

Current interest rate cut expectations are extremely pessimistic, and the narrative of a strong dollar may reverse in February; at the same time, US bond yields may begin to reverse again in February due to weakness in non-farm payrolls and CPI, for example, the non-farm payroll data for January to be released in early February will face annual revisions and base adjustments, and the 2024 non-farm payrolls may be revised down by 1 million.

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at one's own risk