Chinese Stocks Resilience Likely to Continue Amid Haven Demand, Say Fund Managers

Chinese stocks are likely to continue the resilience they have shown since the war in the Middle East began, thanks to haven demand for yuan-linked assets, the green shoots of the property market and the inclusion of tech start-ups in key equity gauges, according to fund managers and investment banks.

Optimism about Chinese equities was building after official data showed that home prices in the biggest mainland cities reversed declines and an inflationary trend took hold in March, said money managers including BNP Paribas Asset Management and Invesco. Meanwhile, the expected addition of more artificial intelligence companies, such as Knowledge Atlas and MiniMax, to Hong Kong's benchmark index and tech gauge in June could draw more fresh capital, Morgan Stanley said.

Recovery in the weak parts of China's economy signals that the worst for the world's second-largest economy is probably behind it, and the nation continues to benefit from innovative technology, AI adoption and strong global supply chains. Chinese assets have regained favour among overseas investors seeking hedges amid the US-Israel war on Iran over the past two months, driving gains in stocks and bonds simultaneously.

“The return of mild inflation is good news for Chinese corporate revenue and profit,” said Chi Lo, a strategist at BNP Paribas Asset. “It is likely that the worst of China's property market woes has passed. It will become a smaller drag on growth going forward.”

Second-hand home prices in the first-tier cities including Shanghai and Beijing rose from the previous month in March, while the nation's economy grew by a faster-than-expected 5 per cent in the first quarter, the statistics bureau said last week. Earlier data also showed that producer prices, a gauge of industrial products, increased 0.5 per cent in March year on year, snapping a 41-month streak of declines.

The stabilisation in property prices in the first quarter – despite a lack of meaningful stimulus measures – showed that the four-year property downturn could have run its course, Lo said, contrasting the situation from a short-lived rebound at the same time last year after a strong stimulus package unveiled in September 2024.