Investment Banks Are Bullish on Chinese Stocks: Nomura Talks Up "Tactical Overweight", Citi Raises Hang Seng Target Price

Following the trade "truce" reached between China and the US on Monday (May 12), global financial institutions are now reconsidering their forecasts for the outlook of Chinese stocks.

On Monday, the US and China reached an agreement in Geneva to significantly reduce bilateral tariff levels. The US side canceled a total of 91% of the tariff hikes, while the Chinese side canceled 91% of the corresponding retaliatory tariffs. In addition, the US side suspended the implementation of 24% reciprocal tariffs, and the Chinese side also suspended the corresponding retaliatory tariffs.

This progress has boosted the sentiment of financial institutions worldwide, with many expressing optimistic views on China's growth prospects and indicating that they are revising their outlook for Chinese stocks.

In a report following the Sino-US trade negotiations, Nomura stated that it had upgraded its rating for Chinese stocks to "tactical overweight" and said it would shift some funds from India to China.

Nomura's report wrote that against the backdrop of expected easing of Sino-US tariffs and the continued implementation of domestic stimulus policies,the A-share market exhibits stronger defensive capabilities and policy support. The trend of global capital reallocating towards Chinese stocks may further drive inflows, and the policy flexibility and economic recovery pace of the Chinese market may enable it to perform better amid market volatility. In the short term, the market may be dominated by volatility, but China's domestic policies still have room for maneuver, providing long-term support for the market.

Citigroup, on the other hand, raised its year-end target price for the Hang Seng Index by 2% to 25,000 points and forecasts it to reach 26,000 points by the first half of 2026. As of press time, the Hang Seng Index was reported at 23,225.32 points, up nearly 3% from the previous day.

Pierre Lau, Citi's China equity strategist, pointed out that he had upgraded the rating for the consumer sector from neutral to overweight and stated that China's internet and technology sectors have broad prospects.

The US stock market generally surged on Monday due to news of the Sino-US trade negotiations, with Chinese stocks significantly outperforming the broader market. The Nasdaq Golden Dragon China Index rose 5.4%. Among internet stocks, JD.com rose 6.47%, Pinduoduo rose 6.14%, Alibaba rose 5.76%, and Baidu rose 5.08%.

Eddy Loh, Chief Investment Officer of Maybank, said, "We believe the risk-reward ratio for Chinese stocks is attractive, and market valuations remain low." He also believes thatthere are investment opportunities in the communication services and some non-essential consumer goods sectors.

William Ma, Chief Investment Officer of GROW Investment Group, a global asset management firm that has long been bullish on China, believes that the rebound in the Chinese market is a sustained re-rating, especially in the context of China's recent policy easing and efforts to stimulate consumption, which may provide an additional boost to China's economy and market.

However, some experts have warned against getting carried away by the possibility of a tactical rebound in Chinese stocks.

Loh from Maybank pointed out that while the Sino-US trade negotiations have been better than market expectations, the arrangement is still temporary and further changes may occur in the future, so investors need to be cautiously optimistic.