JPMorgan has upgraded Chinese equities from neutral to overweight, arguing that the chances of a significant rise in 2026 outweigh the risks of a major decline. The bank sees about 19% upside for the MSCI China Index under its base case, with strategists calling current valuations attractive and investor positioning still light after years of underperformance.
The bank says Chinese stocks are in the early stages of recovery after a pullback following the Q1 2025 rally, and that improving sentiment could attract capital back into the market. JPMorgan highlights four main drivers of the bullish shift:
- accelerating adoption of artificial intelligence and broader technological upgrading;
- “anti-involution” policies designed to curb destructive price competition and raise profit margins;
- improved shareholder returns via buybacks and higher dividends; and
- a gradual reallocation of domestic household liquidity from deposits into equity assets.
Strategist Rajiv Batra’s team says China’s valuations sit near post-GFC averages, well below highs seen in the US, India and Taiwan, while global active funds remain notably underweight the market, leaving room for inflows if sentiment turns.
JPMorgan’s bull case puts the MSCI China Index at 120 by end-2026, while its bear case is 80. The bank argues AI roll-outs, high-end manufacturing initiatives and ongoing policy support will help drive both earnings recovery and valuation expansion over the next year.
