BCA says stimulus moderate, US uncertainty dampens China outlook By Investing.com

Investing.com– BCA Research has signaled a negative outlook for Chinese markets, with middling stimulus measures from Beijing and uncertainty over Sino-US relations inspiring little optimism about the country’s outlook.

Although the research firm still maintained a neutral stance on China and emerging markets in Asia, it said Beijing had missed an opportunity to overhaul its economic policy, which presented several short-term headwinds.

“China missed the chance to change the course of economic policy and now faces growing social instability and Western protectionism. This political approach implies that it is not afraid of the escalation of strategic conflicts in East Asia. Investors should continue to underweight China assets,” BCA analysts wrote in a note to clients this week.

The Chinese Communist Party held a series of key meetings in July – the Third Plenary and Politburo meetings.

BCA said neither the meetings nor a 20-point plan to boost consumption had inspired investor confidence in the country.

The research firm said China’s foreign policies are likely to become tighter in the near term, which could further drive away foreign investors and alienate the country, especially if the economy deteriorates further.

A close 2024 presidential race has also presented more uncertainty for China, with recent polls showing Donald Trump and Kamala Harris polling neck-and-neck.

The BCA said the Trump presidency has announced more trade restrictions against China, while Harris is likely to pursue a policy of appeasement with Beijing.

“The bipartisan US policy consensus on China has not caused much economic pain for Americans and will therefore persist for years to come. This raises a high probability of US policy “overcorrection” or aggression that could destabilize China,” BCA analysts wrote.

BCA still has a neutral rating on China and broader emerging markets in Asia. But the research firm has a very risky rating on the region in terms of geopolitical risk over the next 18 months.

China and indexes have posted steep losses over the past two months and traded near six-month lows as a series of weak economic readings hurt sentiment about the country.