Chinese Stocks Still Hold Significant Upside: Citi

Citi analysts are expressing optimism about Chinese stocks, highlighting considerable upside potential even after a recent rally that brought them to year-to-date highs. Following the Chinese government’s announcement of economic stimulus measures, Citi’s China equity strategy team continues to adopt a bullish outlook, anticipating further gains as additional stimulus packages are likely.

The analysts suggest that the government is expected to introduce a RMB3 trillion consumption support package, which will complement the positive effects of the recent stimulus initiatives.

Citi has noted that Chinese equity valuations remain low compared to those of emerging market stocks, despite the share price increases seen over the past three weeks. They argue that there is still significant growth potential for Chinese stocks as the economy receives ongoing support.

In addition, Citi has raised its end-June 2025 targets for major Chinese stock indices by over 20%. The new projections include the Hang Seng Index reaching 26,000, the CSI 300 hitting 4,600, and the MSCI China Index climbing to 84. This upward revision underscores the potential for continued gains in the Chinese market.

Citi also believes that the forthcoming earnings season, scheduled from mid-October to early November, could lead to upward revisions in FY25 earnings forecasts, offering additional momentum for Chinese equities.

The report indicates that there is potential for revisions to FY25 earnings forecasts, suggesting that the market might continue to outperform in the short term. Furthermore, the bank noted that the Chinese economic stimulus is likely to have favorable effects on Japanese stocks, particularly for companies that are heavily exposed to China or that have strong correlations with Chinese stock performance.