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Chinese Stocks May Face Profit-Taking and Increased Risk Aversion, Analysts Say
Chinese stocks are likely to experience profit-taking and increased risk aversion in the coming days, despite a strong performance in 2024, according to analysts at Morgan Stanley. The firm’s analysts warn that this could be due to the looming threat of US tariffs under President Donald Trump, particularly a potential 10% tariff on all Chinese imports by February 1.
Trump has also called for an investigation into trade deficits and tariffs, to be completed by April 1. While the 10% duty is smaller than the 60% tariffs previously threatened, it still poses headwinds for Chinese exports. As a result, Morgan Stanley analysts expect a potential slowdown in Chinese exports this year, amidst heightened tariff uncertainty.
China’s stock exchanges, the Shanghai Composite and the Shenzhen Composite, saw losses this week following Trump’s comments, although they remained flat so far in 2025. Analysts at Morgan Stanley predict that investors will take profits and reduce their exposure to risk ahead of the holiday season. The firm also flags potential near-term risks from a downward revision in earnings for 2024, as major Chinese companies prepare to report annual earnings in the coming weeks.
