Financial institution J.P. Morgan expresses new doubts about certain equities

In a recent study, strategist Pedro Martins Junior and his team have highlighted ongoing concerns and problems with the Chinese economy and real estate market. The report comes as many experts previously favored Chinese stocks, but a comeback for these assets seems increasingly unlikely.

The study by J.P. Morgan downgraded the rating of Chinese stocks from Outperform to Neutral, suggesting that the comeback of the year for Chinese stocks might not occur in 2021. Despite a favorable valuation and a years-long downtrend, further trouble is expected for Chinese stocks.

One of the main concerns is the potential impact of the ongoing trade conflict between China and the US on the economy in the Middle Kingdom. The report mentions that tariffs being raised from 20 percent to 60 percent in the event of a trade conflict could have further significant impacts on China's economy.

Political problems, such as the US election, could also put more pressure on Chinese stocks. The upcoming elections could potentially reignite the trade conflict between the two nations, with tariffs possibly being raised.

The study also points out that after the People's Republic of China, the most interesting growth markets currently include emerging markets in Asia such as South Korea and Thailand, as well as certain Latin American countries like Mexico. Raw material-exporting countries may also benefit despite global trade uncertainties.

India, Mexico, Saudi Arabia, Brazil, and Indonesia are considered more interesting as emerging markets by J.P. Morgan, according to the study.

In the case of Chinese stocks, the iShares MSCI China A UCITS ETF (WKN: A12DPT) has given up significant gains since the beginning of the year, resulting in a loss of over 5%. The temporary YTD gain of 9.1 percent observed before the significant loss is a testament to the volatility of the Chinese stock market.

Despite the potential challenges, J.P. Morgan currently does not believe in the big comeback of Chinese stocks in 2024. Investors are advised to tread cautiously when considering investments in Chinese stocks in the current economic climate.