Beyond the Charts: The China Bull Market May Have Only Just Begun
For the past two years, large-cap tech stocks have dominated stock market returns. And the top tech stocks are also domiciled in the United States. Consequently, there’s been a growing value gap between U.S. stocks and the rest of the world.
After hitting a multi-year low, Chinese stocks have started to trend higher in recent months. Meanwhile, U.S. tech stocks have started to trade sideways. That suggests that Chinese stocks may have more upside ahead.
Thanks to the start of a rally in 2024, Chinese stocks had their best performance in years. That’s even amid fears of a slowing Chinese economy.
Plus, on a valuation basis, Chinese stocks remain far less expensive than their American counterparts.
For instance, Alibaba Group (BABA) trades at about 23 times earnings. That’s about half the valuation of Amazon (AMZN), a comparable company, which trades at over 42 times earnings.
With a relatively low valuation and a stock market now trending higher again, investors may see their best returns with Chinese stocks in 2025. Other international markets also trade at a lower valuation than U.S. stocks.
Given that tariff and tax uncertainties may impact all global markets, the relative value could prove the winner. Investors may want to shift some capital out of high-priced U.S. stocks and move to the value of Chinese stocks now.