Wall Street giants are rallying, with JPMorgan Chase and Fidelity International highlighting now as an opportune moment to enter the market, as potential returns next year are expected to far outweigh risks.
JPMorgan Chase has upgraded its rating on Chinese stocks to "overweight," stating that the prospects for substantial gains next year now outweigh the risks of significant losses.
"Chinese equities have given back some of their year-to-date outperformance, creating an attractive entry point," wrote strategists including Rajiv Batra in a report released Wednesday. "Multiple supportive factors will emerge next year, such as AI adoption, consumption measures, and governance reforms."
This bullish shift from JPMorgan comes as Chinese stocks retreat from multi-year highs hit about a month ago. The MSCI China Index has fallen 6.2% this quarter, while the broader MSCI Asia Pacific Index gained 1.3%.
Rajiv Batra and his team had recommended investors buy Chinese stocks in early April. Since then, the MSCI China Index has risen about 33%, compared with a 37% gain in the Asian benchmark.
The report noted that China's stock market remains in the early stages of recovery from a downtrend that began in late 2020, meaning "valuations remain acceptable and positioning is still light."
JPMorgan strategists added that optimism toward China, coupled with policy support, ample liquidity, governance reforms, and net-positive guidance from AI-heavy stocks, suggests Asian equities are most likely to deliver moderate to above-average returns next year.
Matthew Quaife, Global Head of Multi-Asset Investments at Fidelity International, also expressed greater optimism for China's stock market in 2026, particularly favoring the tech sector. He noted that international investors are returning to China, and the recent market pullback presents a good opportunity to increase exposure to Chinese tech. Regarding bonds, Quaife views Chinese debt as a relatively safe haven amid volatility in global bond markets.
JPMorgan projects the MSCI Asia ex-Japan Index could climb to 1,025 next year, implying a roughly 15% gain from Wednesday's close. The bank is overweight on China, Hong Kong, South Korea, and India; neutral on Taiwan; and underweight on Southeast Asia.
Wei Jixing, Chief Strategist at Kaiyuan Securities, pointed out that while A-shares have been rising since late June, the current pullback falls within normal volatility ranges. Historical bull market corrections suggest that after adjustments, the market is more likely to resume its previous growth style rather than shift entirely. If this pattern holds, opportunities may emerge in sectors like defense, media (gaming), AI applications, Hong Kong internet stocks, and power equipment.
Looking ahead to 2026, Kaiyuan Securities expects market styles to become more balanced, with tech maintaining its long-term appeal while cyclical sectors also offer opportunities. Dividend-paying stocks could outperform in 2026 compared to 2025.
Risk Warning: Markets involve risks, and investors should exercise caution. This article does not constitute personal investment advice and does not account for individual financial circumstances or objectives. Investors should assess whether the opinions herein align with their specific situation before making decisions.