
China/Hong Kong equities have long faced investor scepticism over its investability and fundamental outlook, with relative share prices and valuations underperforming both EM and DM markets since the start of 2026. Yet, clear green shoots are emerging, suggesting China’s economy may have finally bottomed out. We stand on the constructive side of the debate, viewing a genuine fundamental turnaround as potentially closer than the prevailing consensus gloom expects.
China’s macro fundamentals see extended green shoots. Despite lingering pressure from the ongoing property slump, geopolitical tensions, and involution-led deflationary forces, China’s economic indicators remained resilient, with CPI strength since the start of year carrying through to March. Producer prices, an important indicator that has historically led CPI, also turned positive last month for the first time in more than three and a half years. Looking ahead, upward momentum in global industrial metal prices will likely continue to cascade through to producer prices, and subsequently, CPI. Combined with moderately supportive policy measures ahead, this should help China exit deflation more sustainably over the course of this year.

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