The investment strategies for 2025 have become a focal point for various public mutual fund companies as they embark on their annual forecasting meetingsBroadly, the sentiment surrounding the Chinese A-share market for 2025 appears largely optimisticMarket analysts are inclined to believe that an upturn in national policies, coupled with a resurgence in corporate earnings, will render the equity market an enticing option for investorsSpecific areas of interest include advanced technologies and consumer sectors, with emerging fields like autonomous driving grabbing special attention.

As the financial performance race for 2024 inches closer to its finish line, several mutual funds are already leading the packBy December 25, statistics reveal that six mutual funds have generated returns exceeding 50% this year, with an additional 46 funds registering between 40% and 50%. Nearly 900 funds have also seen returns of over 20%. The heightened competition for year-end performance rankings is evident, with institutions like Morgan Stanley's digital economy fund (A) achieving a staggering 72.57% gain, placing it at the forefront of the leaderboard

This achievement is particularly noteworthy due to its stark contrast to the second-place fund, ICBC’s emerging manufacturing fund (A).

The call for investment strategies tailored for 2025 has echoed throughout the halls of various public mutual fund companies, signaling a proactive approach to future market engagementsFrom a macroeconomic perspective, insights from prominent figures like Wang Yong, Chief Asset Allocation Officer of Great Wall, underscore the recent initiatives aimed at mitigating local governmental debtWith the introduction of favorable policies such as reduced down payments, lower mortgage rates, and tax incentives, there’s a palpable expectation that the pervasive issues surrounding local debt risks and the real estate sector can be substantially addressed.

Furthermore, a significant influx of funds is projected for 2025, as Central European Asset Management anticipates net inflows exceeding 600 billion yuan into ETFs, with around 400 billion yuan earmarked for the A-share market

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Even though foreign investment levels in A-shares remain modest, an anticipated improvement in economic conditions could revive interest and capital flow from overseas investors.

Risks associated with the 2025 market narrative are characterized predominantly by a few crucial uncertaintiesCentral European Asset Management highlights possibilities such as policy announcements falling short of expectations, potential corrections following rapid market upswings, and fluctuations in the overseas markets, particularly in the U.SDespite these risks, their long-term outlook on the Chinese market remains optimisticHowever, it is acknowledged that a full economic recovery will require some time, and short-term instability is to be anticipatedInvestors are thus advised to exhibit patience while strategically managing their positions according to their risk tolerance.

Looking forward to 2025, the equity market is expected to capture more attention

Analysts at Morningstar posit that “China stands out as the most intriguing market for global investors in 2025.” The firm believes that the upward potential for Chinese assets remains vast, maintaining a solid conviction regarding the medium-to-long-term market performance.

Commenting on the equity landscape, Zhu Hongyu, Chief Research Officer at China Merchants Fund, suggests that there is a considerable likelihood of the equity market stabilizing as corporate performance aligns and moderate valuation expansion occursThe resulting characteristics of the overall index are projected to present a stabilizing oscillation, leading to a relatively appealing investment environment in the equity space.

Wang Yong offers a positive outlook for the A-share market in the upcoming year, especially in light of the policy expectations aligning and corporate earnings on an upward trajectory

Particular interest is placed on sectors such as technology, which are perceived to hold higher certainty in outcomes, while consumer sectors marked by potential recovery could also offer lucrative opportunitiesAdditionally, high-dividend stocks are noted as suitable underlying assets to consider.

According to Zheng Zheng, General Manager and Head of Multi-Asset Management at Bosera Fund, the macroeconomic environment is likely to improve substantially under proactive policy measuresFollowing a significant rebound in the domestic stock market since late September, current valuations do not reflect overvaluationThe overall outlook is optimisticPresently, when comparing valuations globally, A-shares, as well as those relative to equities, bonds, currencies, and GDP, hold considerable room for growth, which is expected to rise in parallel with the further rollout of macro policies.

In the view of Ping An Fund's Research Director, Zhang Xiaoqing, a substantial shift in the economic fundamentals isn’t anticipated until the second quarter of the next year

This phase is projected to witness an environment of intensifying policy stimulation and positive announcements, thus significantly reducing market adjustment risks and allowing investors to take a more aggressive approach.

Central European Fund emphasizes that while immediate uncertainties do exist, the A-share market is rich with structural opportunities, particularly in the realms of technological innovation and mass consumer goods.

As investment opportunities in major asset categories for 2025 are considered, Yi Liyong, Chief Allocation Officer at China Merchants Fund, indicates that supported by positive policy expectations, market risk appetites are likely to rise, which could lead to a fluctuating upward trend in 2025. Domestic demand will steer economic growth amidst potential shocks from overseas risks, placing A-shares in favorable territory for upward movementIn contrast, for Hong Kong shares, the declining interest rate cycle abroad enhances valuation appeal, while the uptick in domestic fundamentals will boost corporate earnings; thus, 2025 might present more opportunities than risks.

Gold investments, backed by declining real interest rates, present strategic allocation value, according to Yi Liyong

Zheng Zheng has suggested an asset allocation order for 2025 as “Stocks > Bonds > Commodities (focused on Gold).” The allocation ratios between stocks and bonds in the investment portfolio would largely hinge on the expected return ratesThe core strategy here involves employing bonds to establish a stable revenue foundation while actively managing equity assetsIn addition, the favorable price-to-earnings ratio of gold assets cannot be overlooked.

When analyzing stock selection within the A-shares, Zhu Hongyu elaborates on the need to seek out stable business models with high barriers to entry and well-priced opportunities in sectors such as consumer goods and resources with high return on equity (ROE). There are considerable investment opportunities to be realized at the intersection of cyclical increases and technological advancement within middle-stream manufacturing, healthcare, and information technology sectors as well

The focus for 2025 should be on sectors related to domestic demand, thereby tapping into both certainty and valuation recovery aspects.

Additionally, Zhang Xiaoqing points out that there’s an increasing enthusiasm for industries benefitting from governmental financial backing, including medical equipment, low-altitude economy, support for births, and equipment modernization amongst othersAs liquidity grows and market risk preferences heighten, tech sectors characterized by future growth potential—like artificial intelligence applications, autonomous driving, and robotics—are also areas worth monitoring closely.

On the subject of the tech sectors in which investors are particularly keen, Yang Ruiwen, a fund manager at Invesco Great Wall Fund, stresses optimism regarding the sector’s accelerated growth trajectoryHe points out that the ripple effects of consumer subsidies on the entire industrial chain can’t be dismissed either