Global Funds Turn to China Stocks, Yuan in Big Bets for 2026

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Global Funds Turn to China Stocks, Yuan in Big Bets for 2026.

stock :: 17hrs ago :: source - bloomberg

By Bloomberg News

(Bloomberg) -- Investors are ramping up bets on China’s stocks and currency as 2026 kicks off, signaling a more decisive shift into the country’s assets at a time of rising global uncertainties.

Global investment firms from Goldman Sachs Group Inc. to Bernstein Societe Generale Group have lifted their assessment of the world’s second-largest equities market, citing compelling valuations, supportive industry policies and a rosy earnings outlook.

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As Beijing allowed the yuan to breach the key 7-per-dollar level, market participants are also doubling down on the currency, with some predicting it to rise to as strong as 6.25 this year. Citigroup Inc., BNP Paribas Asset Management and Bank of America Corp. are among those favoring the yuan.

The louder bullish chorus has come as China staged a rare stock and currency twin rally last year, a virtuous cycle that may further restore confidence in the country’s assets. The surprise resilience in some parts of the world’s No. 2 economy, from booming exports to recovering factory activity and a stable banking system, also draws hope that laggards such as property and consumer stocks may deserve another look too.

“A firmer yuan can help equities by improving dollar-based returns and risk sentiment,” said Christy Tan, an investment strategist at the Franklin Templeton Institute. “At the same time, genuine equity inflows, driven by earnings and confidence, can support the currency.”

A key equities gauge of Chinese firms listed in Hong Kong rose over 22% last year, making it one of the world’s best-performing major indexes. The yuan strengthened more than 4% versus the dollar in 2025, its best gain in five years. It marked the first time that the two rallied together since 2017.

Slow Bull

The twin rally has continued into the new year, with the yuan staying stronger than the closely watched 7-per-dollar level and onshore stocks surging to a four-year high.

Bernstein Societe Generale and Goldman were the latest additions to the growing camp of Chinese equities bulls, with the former upgrading the country’s stocks to overweight last week.

The Hang Seng China Enterprises Index currently trades at 10.7 times forward earnings, versus the S&P 500 Index’s 22.3 and the MSCI Asia Pacific Index’s 15.3.

Goldman also raised its year-end target for the CSI 300 onshore stock benchmark to 5,200 last week, implying a 9% upside from Tuesday’s close. The bank also boosted its forecast for Chinese earnings growth, expecting it to accelerate to 14% in 2026 and 2027 from 4% in 2025, citing “artificial intelligence monetization, policy stimulus, and liquidity overshoot.”

In the latest sign of investor enthusiasm, turnover in China’s onshore stocks reached a record 3.65 trillion yuan ($523 billion) on Tuesday, well above the daily average of 1.13 trillion yuan over the past five years.

“A slow bull trend in equities will continue this year,” said Wang Dan, chief investment officer at Shenzhen Sunrise Asset Management. “While economic fundamentals and data don’t support a full-blown bull market, declining interest rates, stronger willingness for investment allocation and long-term positioning in undervalued assets” bode well for a structural bull run to persist, Wang added.

In addition to AI, analysts say they remain optimistic about the prospects of sectors from healthcare to the battery supply chain and farming.

To be sure, there are lingering concerns about the market’s momentum given China’s weak consumption, persistent deflationary pressures and a lack of strong stimulus measures. Tighter margin financing requirements announced Wednesday also show regulators are growing uneasy and attempting to cool the pace of gains.

That said, China’s technological breakthroughs and ability to withstand shocks such as the trade war with the US have impressed some forecasters, with the World Bank being the latest to upgrade its growth assessment for the world’s No. 2 economy.

Such optimism has prompted some observers to take a fresh look at the market’s underperformers.

“If consensus has shifted toward China AI, the contrarian framework starts with what’s still being underweighted,” said Ben Charoenwong, an associate professor at Insead. “Property and real estate credit sit at the center of that.”

Currency Boost

While China’s AI breakthroughs and easing trade tensions offered initial support for stocks last year, the yuan’s quickening rally and breaching of the closely watched 7-per-dollar level in December expanded investors’ optimism.

“2025 witnessed a markedly positive shift in investor narrative on China,” Citigroup economists led by Xiangrong Yu wrote in a recent note, expecting the yuan to undergo “managed appreciation” and strengthen to 6.8 against the greenback in six-to-12 months.

Likewise, Goldman issued a 12-month forecast in November for 6.85 while Bank of America Corp. also penciled in 6.8 for this year. BNP Paribas Asset Management expects the dollar-yuan exchange rate to slide to the 6.5-to-6.8 range this year, with Eurizon SLJ Capital targeting 6.25 for end-2026.

While UBS Group AG doesn’t expect the yuan to appreciate against the dollar this year, it sees the Chinese currency strengthening against those of the country’s major trading partners.

An official gauge measuring the yuan’s strength on a trade-weighted basis dropped more than 3% last year, partly because the currencies of China’s major trading partners appreciated faster against the dollar.

“There is room for the yuan to gain in the near term to reflect robust exports and trade surplus, especially after the currency fell last year on a trade-weighted basis,” UBS economist Ning Zhang said at a briefing on Tuesday.

--With assistance from Abhishek Vishnoi, Jing Zhao and Wenjin Lv.

(Updates with announcement on tighter margin requirement in 14th paragraph.)