Allianz Investment: Global capital flows have shown a significant shift, optimistic about the Chinese stock market

According to the Zhitong Finance APP, Allianz Investment stated that in the first half of 2025, under the environment of a sharp decline in the US dollar and rising risks of economic recession in the United States, global market uncertainty is intensifying, investor confidence is weakening, and there has been a noticeable shift in capital flows. Key issues such as US tariffs, consumer confidence, inflation, and recession risks will dominate the economic landscape in the second half of the year, while military actions in the Middle East may further impact market sentiment.

Concerns about the credibility of US policies and fiscal sustainability are driving capital flows to Asia, strengthening regional currencies and creating new opportunities for economic growth in Asia. Tom Ji Cheng, Senior Economist for Asia Pacific at Allianz Investment, stated that American exceptionalism is threatened by market concerns over the credibility of US policies and fiscal sustainability, leading to the sell-off of US Treasury bonds and the dollar. This trend suggests that US GDP growth will slow, recession risks are rising, prompting investors to seek investment opportunities in global non-dollar assets. The shift in related capital flows has been reflected in the strong performance of European stocks and gold, which serve as hedges against currency depreciation.

Tom Ji Cheng pointed out that the trend of de-dollarization is particularly beneficial for the Asian economy, and the appreciation of regional currencies also provides central banks with room for easing policies. Rising concerns about the sustainability of US fiscal policies are prompting some capital to flow back to Asia.

Currently, Asian economies hold approximately USD 8.6 trillion in US bills and fixed-income assets. If some capital flows back, it will significantly support regional currencies and enhance the performance of regional stock and fixed-income markets.

Tom Ji Cheng is more optimistic about Asian economies driven by domestic demand, where policy interest rates have room for cuts and are not affected by specific political and economic concerns, especially China, India, and Australia. However, tensions in the Middle East may push up oil prices, affecting Asian inflation, external balances, and the pace of monetary policy easing.

Regarding Asian stocks, Xue Yonghui, Chief Investment Officer for Asia Pacific equities at Allianz Investment, stated that Asian stock markets have performed outstandingly this year, with the MSCI Asia Pacific Index showing significant gains relative to major US stock indices. Since the implementation of Trump 2.0 policies, the weakening of the dollar has further supported Asian stock markets. Currently, the forecasted price-to-earnings ratio for the MSCI Asia Pacific Index is 14.2 times, and valuations remain attractive.

Xue Yonghui pointed out that the stock market in the Asia Pacific region is full of investment opportunities, especially in large, highly liquid markets with robust domestic demand that can withstand external shocks. Investors should consider diversifying their allocations among growth, value, and dividend stocks while seizing opportunities for excess returns brought by themes such as innovation, transformation of consumption patterns, and corporate governance reforms.

Allianz Investment is optimistic about the markets in China, India, Japan, and South Korea. Xue Yonghui noted that China has set a GDP growth target of around 5%, demonstrating the government's necessity to promote domestic demand and strengthen trade ties. As Chinese exporters gradually evolve into global multinational enterprises, especially in the fields of electric vehicles and robotics, the market development potential is enormous. Additionally, measures taken by the Chinese government to support the stock market help stabilize the market