FSMOne: The Chinese stock market has strong tariff resistance, with a target of 24,500 points for the Hang Seng Index in 2025
FSMOne analysis believes that the Chinese stock market has performed strongly under the impact of tariffs, with a target of 24,500 points for the Hang Seng Index in 2025. Assistant Manager Xie Youxuan pointed out that AI and the business environment will drive corporate profit growth, with rising demand for cloud computing and data centers in the future. U.S. tariffs are expected to remain in the range of 10%-20%, and the depreciation of the dollar may affect consumption. Earnings expectations for U.S. stocks may be revised down, but the technology sector remains resilient. The Global Bond Department recommends that investors pay attention to short-term government bonds and high-credit corporate bonds
According to the Zhitong Finance APP, Xie Youxuan, Assistant Manager of the Portfolio Management and Research Department at FSMOne (Hong Kong), stated that the impact of the trade war is controllable under macro policy responses, and the Chinese stock market can better withstand tariff shocks. He expects the target for the Hang Seng Index in 2025 to be 24,500 points, calculated based on a price-to-earnings ratio of 11 times. Based on a target price-to-earnings ratio of 10 times, the target for the MSCI China Index in 2025 is estimated to be 69.
Xie Youxuan indicated that due to the surge in Chinese technology stocks and AI concept stocks, he expects an increase in demand and spending on cloud computing and data centers across various industries in the future, which is likely to sustain the profitability of related companies. China has the opportunity to outperform global stock markets, and the economic growth of South Korea and Taiwan is also largely benefiting from the semiconductor industry driven by AI demand.
Regarding the U.S. tariff issue, he stated that there is a chance for tax rates to decrease, but it is difficult to return to the pre-trade war level of 2-3%. It is expected that by the end of the year, effective U.S. tariffs will remain in the range of 10% to 20%.
Influenced by the Trump administration, investor confidence in the U.S. dollar continues to weaken. Xie Youxuan believes that the depreciation of the dollar will reduce purchasing power, leading to weakened consumption, and under the "mild stagflation" of accelerating inflation and slowing economic growth, the Federal Reserve's room for interest rate cuts in the second half of the year is limited, with the number of cuts likely to be fewer than market expectations.
Regarding U.S. stocks, Xie Youxuan believes that the expectations of mild stagflation have not fully reflected forecasted earnings, and he anticipates further downward adjustments in earnings. He believes that the U.S. technology sector remains resilient and has strong earnings growth.
Shi Jiasong, Assistant Research Manager of the Global Bond Department at FSMOne (Hong Kong), stated that the U.S. inflation rate may return to a relatively high level of around 4%, with price increases caused by tariffs gradually reflecting in the third or fourth quarter of this year.
Looking ahead to the second half of this year, Shi Jiasong pointed out that long-term bond yields still face upward pressure. He believes that investors may consider ultra-short-term U.S. Treasury bonds or short to medium-term corporate bonds with good credit quality.
He indicated a preference for investment-grade bonds or companies that are more defensive under the tariff war. However, he cautioned to be careful with cyclical industries and those more affected by trade or geopolitical factors, and to carefully select high-yield issuers
