RBC expects Chinese stocks to stay within a specific range in the second half of 2025. US-China trade talks and company earnings will likely play a big role in their performance. RBC believes that while a worst-case trade scenario has been avoided, we will still see some ups and downs as negotiations continue. They’re noticing signs of recovery, and the impact of US tariffs is becoming more obvious.

Earnings Resilience and Possible Growth

The focus is on how stable earnings can be and if the rise in earnings per share (EPS) can lead to further improvements in stock values. Possible positive surprises may come from government reforms, like better market access and changes in industrial policies. What this means is that we shouldn’t expect sharp movements in Chinese stocks in the coming months. Robertson’s team thinks these stocks will mostly respond to economic signals and policy updates instead of purely market emotions. While the market won’t be completely predictable, its current behavior shows it’s cautious and waiting rather than aggressively pushing forward. Expectations for increased trade tensions have lessened, so worst-case outcomes like harsh tariffs or sudden sanctions seem unlikely at the moment. However, news from the US can still quickly affect stock prices. This means we should be ready to react but not overreact. As tariffs start to impact profits, any changes will show up in forecasts before anything else. Currently, those signals are mixed but not alarming.

Potential Reforms and Timing of Fiscal Changes

Earnings are slowly starting to rise again, which is more significant than usual. If increased EPS comes with higher sales and better profit margins, it indicates genuine growth, not just a temporary trend. This could allow stock valuations to rise naturally rather than just from market sentiment or extra liquidity. We’re watching how this develops in different sectors, particularly in financials and large industrial companies. If positive changes do happen, they will likely come from specific reforms rather than broad announcements—such as improvements in state-owned enterprises or policies that make it easier for consumers to access financing. Even small actions, like expanding pilot zones or relaxing quotas, can impact global market confidence, especially if they bring more regulatory clarity. The kind of fiscal support given will also be important. Approvals for new infrastructure projects or financial aid to struggling areas can create real changes and lead to quick adjustments in stock evaluations. We’re preparing to monitor not just the policies stated, but how quickly they are implemented. The timing is often more crucial than the message itself. If promised fiscal support doesn’t arrive as scheduled, it can lead to shifts in market positions, even if help eventually comes. In this situation, being flexible and focusing on liquid, responsive assets makes more sense than investing in fixed long-term positions. No single piece of news will drive the market’s future movements. However, a mix of steady earnings, gradual reforms, and timely stimulus could lead to market changes. Timing our trades to align with that connection—where data shows improvement and policy implementation follows—is key. For now, we should focus on what we can already see and be ready to act quickly based on the next developments. Create your live VT Markets account and start trading now.

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