China’s equity markets are benefiting from a global shift away from US assets, though the outlook for the second half of 2025 is clouded by signs of a structural economic slowdown, persistent deflationary pressure and worries about an underwhelming policy stance from Beijing, according to strategists.
In spite of elevated political and economic uncertainties, the probability of a global recession remained low, Natixis Investment Managers said on Tuesday. But the firm was cautiously optimistic about Chinese equities in the latter half of the year.
“The markets and investors are awaiting the second leg [of the stimulus policies], which is the fiscal policy … but we do not expect a massive or significant turn in China that will support internal demand,” he said.
Chetouane said deflationary pressure was a core concern.
“Without inflation, companies struggle to protect their margins or deliver earnings growth, and the market is waiting for a green light from Beijing,” he said.
