<div id="readability-page-1">Chinese stocks are likely to continue the resilience they have shown since the war in the Middle East began, thanks to haven demand for yuan-linked assets, the green shoots of the property market and the inclusion of tech start-ups in key equity gauges, according to fund managers and investment banks. Optimism about Chinese equities was building after official data showed that home prices in the biggest mainland cities reversed declines and an inflationary trend took hold in March, said money managers including BNP Paribas Asset Management and Invesco. Meanwhile, the expected addition of more artificial intelligence companies, such as Knowledge Atlas and MiniMax, to Hong Kong’s benchmark index and tech gauge in June could draw more fresh capital, Morgan Stanley said. Recovery in the weak parts of China’s economy signals that the worst for the world’s second-largest economy is probably behind it, and the nation continues to benefit from innovative technology, AI adoption and strong global supply chains. Chinese assets have regained favour among overseas investors seeking hedges amid the US-Israel war on Iran over the past two months, driving gains in stocks and bonds simultaneously. “The return of mild inflation is good news for Chinese corporate revenue and profit,” said Chi Lo, a strategist at BNP Paribas Asset. “It is likely that the worst of China’s property market woes has passed. It will become a smaller drag on growth going forward.” Second-hand home prices in the first-tier cities including Shanghai and Beijing rose from the previous month in March, while the nation’s economy grew by a faster-than-expected 5 per cent in the first quarter, the statistics bureau said last week. Earlier data also showed that producer prices, a gauge of industrial products, increased 0.5 per cent in March year on year, snapping a 41-month streak of declines. The stabilisation in property prices in the first quarter – despite a lack of meaningful stimulus measures – showed that the four-year property downturn could have run its course, Lo said, contrasting the situation from a short-lived rebound at the same time last year after a strong stimulus package unveiled in September 2024. A stronger yuan is also bolstering sentiment on stocks. The Chinese currency has risen about 0.7 per cent against the US dollar since the US began its strikes on Iran – the only currency in Asia to appreciate. “Stocks and bonds in China have also moved in positive correlation for the first time in two years, reflecting haven-like capital inflows,” said David Chao, a strategist at Invesco. “The stronger [yuan] signals macroeconomic and policy stability and should attract foreign capital inflows into Chinese equities and bonds.”  HSBC Qianhai Securities said in a report this month that China stocks would remain resilient because of their relative insulation from the oil shock, a good economic start to the year and the nation’s leading position in green energy and high-end manufacturing. Stocks could get a further boost in June from the widely expected addition of AI firms Knowledge Atlas, also known as Zhipu, and MiniMax to the Hang Seng Index and the Hang Seng Tech Index, according to Morgan Stanley. The stocks would have combined weightings of up to 3 per cent and 7 per cent, respectively, in each gauge, it added. Further adding to tech shares’ momentum, the two stocks were likely to become eligible for trading by mainland investors through the exchange link programme after their market capitalisations met the entry threshold, the US investment bank said in a report on Sunday. Chinese stocks could gain between 5 and 10 per cent by the end of the year, though the path was expected to remain choppy, with sentiment swaying between the uncertainty of geopolitical tensions and positives like an end to the price war in the internet sector, it said. </div>

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<p>Chinese stocks are showing resilience due to haven demand for yuan-linked assets, recovering home prices, and the inclusion of tech start-ups in key indices. Optimism is rising as home prices in major cities stabilize and inflation trends emerge. The addition of AI firms to Hong Kong's indices is expected to attract fresh capital. Analysts suggest that the worst of China's economic downturn may be over, with a projected 5-10% gain in stocks by year-end, despite geopolitical uncertainties.</p>

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Hang Seng TECH Index

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Hang Seng China Enterprises Index

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BNP Paribas

Invesco

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Outlook for China stocks brightens on capital flows, rebounding home prices