Deutsche Bank bullish on Chinese stock market again: 2025 may welcome the "Sputnik moment"

According to the Zhitong Finance APP, on Thursday, the research report "China Stock Strategy" led by Deutsche Bank analyst Peter Milliken, known as the "strongest bull" in the Chinese market, was released. Milliken has been optimistic about the Chinese stock market and has emphasized "reversal trading" almost every few months since the market downturn in 2021.

The latest research report centers on the concept of "China's Sputnik Moment," arguing that China's technological innovation has triggered a "cognitive leap" globally. By 2024, China's dominant position in global manufacturing will be further solidified, successfully surpassing Germany to become the world's largest automobile exporter, and launching the world's first sixth-generation fighter jet and low-cost AI system DeepSeek. American Silicon Valley investor Marc Andreessen even referred to the release of DeepSeek as "AI's Sputnik Moment," symbolizing that China's technological rise can no longer be ignored. (The Soviet Union successfully launched the world's first artificial satellite, Sputnik 1, in 1957, and the "Sputnik Moment" thus became a symbol of a significant shift in the global competitive landscape.)

The report points out that 2025 will be a year for global investors to reassess the Chinese market. As Chinese companies achieve leading positions in multiple manufacturing and service industries, the market is expected to re-evaluate the "China discount," driving the Chinese and Hong Kong stock markets into a long-term bull market.

The report states that Chinese companies have upgraded from "low-cost manufacturing" to "high-value-added innovation" across various industries. From textiles, steel, and electronics to the rapidly rising new energy vehicles (EVs), nuclear energy, high-speed rail, and artificial intelligence (AI) in recent years, Chinese companies have demonstrated strong global competitiveness.

The report emphasizes that the competitive advantage of Chinese companies is not only reflected in manufacturing but is also gradually expanding into high-value-added services. By 2024, China's goods export volume will be twice that of the United States, accounting for 30% of global manufacturing value added. In the service sector, China's market share is also rapidly growing, especially in finance, software, and artificial intelligence.

Deutsche Bank believes that global investors are still severely underweighting Chinese assets, similar to how traditional energy industries were underestimated in the past, but the market will gradually realize this mistake. Despite concerns about economic slowdown, China's economic growth rate is still more than twice that of most developed markets. Considering the dominant position of Chinese companies in the global market, the market capitalization of its stock market is expected to significantly increase.

The report mentions that the current valuation of China's capital market is still at historical lows. Compared to the U.S. Nasdaq, although the CSI 300 index has many globally leading companies, its price-to-book ratio (P/B) is only one-fourth of that of the Nasdaq, and its price-to-earnings ratio (P/E) remains at historical lows. Meanwhile, Chinese concept stocks listed in Hong Kong are generally about 40% cheaper than A-shares, further providing value investment opportunities.

Deutsche Bank points out that although China's economic structure is still adjusting, government policies are leaning towards benefiting the capital market. China's financial system may accelerate liberalization in the future, promoting the development of the capital market and further boosting stock market performance. Since 2024, China has gradually lowered mortgage loan rates, reduced excess capacity, and increased support for the consumption and technology sectorsIn addition, despite the slowdown in China's population growth, its "leading position in automation" and the "Belt and Road" initiative have effectively expanded market hinterlands. The report shows that China has captured 70% of the global market share in industrial robots and has entered emerging markets such as Central Asia, West Asia, and Africa through the "Belt and Road" initiative. In 2024, China's exports to Brazil, the UAE, and Saudi Arabia are expected to grow by 23%, 19%, and 18% respectively, while exports to ASEAN countries will increase by 13%. The rise of these markets indicates that the growth potential of the Chinese economy extends far beyond the domestic market.

Deutsche Bank predicts that the Chinese stock market will enter a long-term bull market by 2025, with Hong Kong stocks and A-shares becoming the focus of global investors. Especially against the backdrop of uncertainty in Federal Reserve policies, a recession in manufacturing in Europe and the United States, and declining competitiveness of Western enterprises, global funds may be reallocated to the Chinese market.

The bank emphasizes that there are certain similarities between the rise of the Chinese economy and that of Japan in the 1980s, but the speed of China's globalization and industrial upgrading far exceeds that of Japan. In the next five years, global investors may need to reassess the growth logic of China and increase their allocation weight in the Chinese market. The report suggests that investors pay attention to China's new energy vehicles, semiconductors, artificial intelligence, leading manufacturing enterprises, and high-end service companies with global competitiveness