MENA Newswire News Desk: JPMorgan has retracted its previous call to buy Chinese stocks, citing concerns over the possibility of a second tariff war following the upcoming U.S. elections. The bank’s analysts downgraded Chinese equities from “overweight” to “neutral” in a note on Wednesday, advising investors to consider alternative markets like India, Mexico, and Saudi Arabia. The decision follows concerns about China’s economic struggles and its weakening appeal to global investors.
According to the note, JPMorgan highlighted the potential for heightened volatility in Chinese stocks due to the U.S. elections in November. The risk of escalating tariffs, which could increase from 20% to as much as 60%, has been deemed more significant than during the previous tariff conflict between the two nations.
China’s CSI 300 index has dropped by over 40% since its peak in 2021, reflecting the nation’s ongoing economic woes. Compounded by a property crisis and weak manufacturing data, China’s economy has failed to meet expectations. A recent report revealed that China’s manufacturing activity fell to a six-month low in August, raising doubts about the country’s ability to reach its GDP growth target of 5% this year.
JPMorgan’s revised forecast suggests that U.S. tariffs of 60% on Chinese goods, if enacted, could cut China’s GDP growth by two percentage points by 2025, reducing the country’s predicted annual growth to 4%. This would follow a year where full-year growth in 2024 is expected to come in at 4.6%, just below China’s target of 5%.
Looking forward, investors are keeping a close watch on China’s economic data, hoping for a more robust stimulus response from Beijing. Inflation and trade balance figures are anticipated next week, offering further insight into the economic trajectory of the world’s second-largest economy.