Top 6 China equity trends in 2025
Not yet a bull market, but plenty of opportunities are lying right in front of you.
Since mid-2021, the China market has been shrouded in ultra-pessimism. To this day, the debate about whether China is investible continues.
At the same time, the gap between what is perceived and what is real is getting wider and wider. The Hang Seng index in Hong Kong returned 18% for 2024. Despite the overall bad mood for retail investors, the Shanghai Composite Index returned 12.67%. While they are nothing spectacular compared with the Magnificent 7, they still ranked among the top-performing markets for the last year. In comparison, India and Japan, two darlings of international capital for the past years, returned only 8.17% (BSE Sensex) and 3% (Topix, in USD terms), respectively.
You may go on to feel gloomy about it, but those in the China market have, on average, made a solid profit in 2024 both in absolute and relative terms.
And it’s not just the broader performance. Believing that China is uninvestible would stop you from seeing some of the top-performing opportunities of 2024. For instance, toy maker Pop Mart (9992.HK) returned a whopping 350% because of its strong performance in both China and international markets (Baiguan featured Pop Mart in August). Xiaomi (1810.HK), after the successful debut of its EV segment, returned 70%. Laopu Gold (6181.HK), a young jewelry maker, returned a fantastic 437% since its listing in June (also featured by Baiguan).
During my recent trips with clients of my firm, BigOne Lab, it’s noticeable that at least for institutional investors, even if many of them are still traumatized by the past 4 years, their research interest in the China market has indeed been growing back. One big reason for this renewed interest is that the US market is too expensive. If just to have somewhere to diversify some risk, you have to research the China market.
This is not to say China is entering a bull market now. But at least, it is safe to say that China has returned to a “normal” market, with stocks going up and down and stronger stocks outperforming the broader market. This is a stock-pickers’ market now.
In this post, we put together a list of top trends in 2025 for those of you interested in this market, including:
High-dividend
Consumption policy pivot
AI-related capex
Education
Low-altitude economy and robotics
Chinese “soft” consumer brands going global
Caution: In this post, we will mention individual equity names. However, these names should only be taken as examples to illustrate the broader trends, but not stock recommendations. Baiguan is not authorized to give investment advice and will not bear responsibility for your trading decisions.
#1 High-dividend
Chasing after high-dividend stocks has been the winning strategy for almost two years and will continue to be so.
In fact, as early as April 2023, we were among the first to come and try to bring your attention to this phenomenon in the article “The revolutionary nature of China’s state-owned enterprises KPI reform”. Our main thesis was that for public finance reasons, the Chinese government placed an ever-bigger emphasis on shareholder returns, which would change the return expectation for many of our state-owned enterprises (SOEs). And we were right. Since that article, China Mobile (941.HK) has returned more than 30%, including dividends. CNOOC, the oil and gas major, returned almost 100%.
The underlying driver is still there and may never be reversed. On top of that, a new development is the rapid decrease of risk-free returns. China’s 10-year government bond’s return has sharply dropped to the 1.6% range. It is clear that Mr. Market is pricing in a gloomy economic future. Is Mr. Market right? We do not know. But we are sure that, in comparison, dividend yields at names such as CNOOC and China Mobile, despite massive stock rallies, are still in the >6% range, so they are massively attractive for Chinese money seeking better returns.
And it’s not just state-owned enterprises. Many good privately controlled companies with consistently strong shareholder return programs also exist. For instance, JNBY (3306.HK) is a steady regional clothing business with loyal fan base. After doubling of stock price in 2024, the company still has a whopping 10% dividend yield. AUPU (603551.SH) is another example. It has a dominant brand in a niche market and is yielding 10% right now. Even Tencent, the most valuable company in China, returned almost 4% to shareholders in a combination of share repurchases and dividend payouts in 2024.
These are just examples. Any stock screener tool can give you a long list of stocks that consistently pay out more than 5% or even 10% annually to investors.
#2 Consumption policy pivot
The consumption policy pivot may be the single most important trend to watch in the China market for 2025.
As we note in the article "China is serious about boosting domestic consumption," a foundational shift in Chinese policymakers’ mindset is that they now see the lack of domestic consumption as the single most important socioeconomic task in the near future.
Once this mindset pivots, there is no turning back. Recent consumer-support programs are just appetizers. Just imagine what will happen when the capital that previously went into building high-speed railways, bridges, and sprawling real estate projects starts to be redirected to support livelihood programs such as healthcare, childcare, education, and consumer subsidies of various kinds.
The investment opportunities in this direction will be multi-staged and multi-layered.
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