JPMorgan is forecasting a robust year ahead for China and Hong Kong equities, predicting gains of close to 20 per cent in 2026. The positive outlook is supported by expectations of steady global growth, stronger corporate earnings and a more balanced competitive environment among major e commerce players. The bank believes these forces will help lift market sentiment and support a sustained rebound after several challenging years.

Valuations normalising as confidence slowly returns

According to Wendy Liu, JPMorgan’s chief China equity strategist, the MSCI China Index is well positioned for further recovery as company valuations begin to normalize. In recent years, Chinese stocks fell to multi year lows as slowing growth, regulatory tightening and global uncertainty weighed heavily on investor confidence. Liu noted that the period between 2021 and mid 2024 was especially difficult, with earnings pressure discouraging both domestic and international investors.

However, the tide appears to be turning. As profitability improves across several key industries, particularly those targeted by Beijing’s efforts to address excess capacity, market fundamentals are showing signs of stabilizing. Liu emphasized that this earnings rebound provides a strong foundation for renewed optimism.

Policy support and improving sector dynamics

A major factor underpinning JPMorgan’s forecast is the Chinese government’s push to restructure industries with oversupply issues. These measures are expected to improve pricing power and reduce competitive pressure, especially in areas such as renewable energy, electric vehicles and consumer technology. As Beijing fine tunes these policies, analysts anticipate that corporate profitability will continue to strengthen, contributing to healthier market performance.

The easing of intense competition among the country’s large e commerce platforms is also helping restore stability within the sector. After years of aggressive expansion and price wars, companies are now shifting toward more sustainable growth strategies, which may improve margins and investor sentiment.

Global conditions offering additional support

JPMorgan’s outlook also reflects broader global economic expectations. The bank anticipates resilient worldwide growth in 2026, which would benefit export oriented sectors and reduce external pressures on China’s economy. Stable global demand would help support earnings for Chinese manufacturers and technology firms while boosting confidence among investors who rely on strong international markets to drive returns.

Additionally, an improving global risk appetite could lead to increased capital inflows into emerging markets, including China and Hong Kong. As valuations remain relatively attractive compared to major Western markets, investors may find renewed interest in the region’s equities.

Investors looking ahead with cautious optimism

While the forecast is encouraging, analysts acknowledge that risks remain. China continues to navigate challenges in its property sector, faces ongoing geopolitical tensions and must manage its transition toward a more innovation driven economy. Nevertheless, JPMorgan believes that the strengths outweigh the uncertainties, especially given the clear signs of earnings improvement.

Liu stressed that confidence in the market’s trajectory stems from concrete financial data rather than sentiment alone. As earnings improve, companies regain stability and policymakers continue to support restructuring efforts, the foundation for sustained growth becomes more solid.

If these trends continue, China and Hong Kong stocks could see one of their strongest performances in recent years. For investors looking beyond short term volatility, 2026 may offer a compelling opportunity to reengage with markets that are beginning to show real signs of recovery.