As 2025 draws to a close, Wall Street’s love affair with Chinese equities is in full swing. While the relationship between global investors and China has been a rocky one, market sentiment is now about varying degrees of bullishness.
In a panel discussion moderated by JPMorgan at the annual meeting of the Emerging Markets Trading Association earlier this month, some of the speakers said China’s stock market had undergone a shift from “uninvestable” to “irresistible”, especially in the all-important technology sector.
This is a far cry from the extreme bearishness from February 2021 to January 2024, which caused the MSCI China index – which tracks Chinese companies listed at home and abroad – and the CSI 300 index of Shanghai- and Shenzhen-listed shares to plunge 58 and 45 per cent respectively.
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A series of widely circulated research reports by JPMorgan in March 2022 that described China’s internet sector as “uninvestable” had an outsize impact on sentiment. Although the word caused a furore, with the bank’s editorial staff removing it from most of the published reports, the label stuck.
Part of the problem was the lack of a positive catalyst for a recovery in Chinese asset prices. The combination of a deep cyclical and structural downturn, regulatory uncertainty, insufficient and ineffective policy stimulus and the absence of a captivating theme or trend for investors to latch on to exacerbated the deterioration in sentiment.
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However, global fund managers were too bearish on China in the first place. Most paid insufficient attention to the economic and geopolitical consequences of Beijing’s prioritisation of technological self-reliance. As Morgan Stanley noted in a June report, foreign investors “spent much less time covering China since 2021/2022, which had resulted in limited knowledge of the latest breakthrough on the tech and smart manufacturing fronts”.
