Chinese stocks have been “dead money” for an investment point of view for quite some time, but Michael Gayed of “The Lead-Lag Report” believes that could change in 2025.
The market veteran now expects Chinese equities to outperform their US counterparts over the next four years.
“If you’re going to do a spread trade, going long China and short US, dollar for dollar, could be a really interesting pair trade to consider,” he argued in a CNBC interview on Monday.
Gayed’s remarks arrive at a time when the S&P 500 has been losing on concerns of a global trade war after President Trump’s tariff announcements, while Chinese stocks continue to benefit from a “DeepSeek infused rally.”
Is the Trump administration a negative for US stocks?
Michael Gayed’s four-year view essentially means that US stocks will underperform China under the Trump administration.
However, the expected weakness doesn’t really have anything to do with who’s in power in the United States.
Instead, it’s based entirely on attractive valuations that could drive global capital to Chinese stocks in 2025.
I’d argue there’s tremendous underinvestment [in China] given the valuations are so markedly different between the US and Beijing.
It’s this discrepancy that will contribute to increased allocation to Chinese equities from here on out, he said this morning on “Squawk Box Asia”.
Why does Gayed have a contrarian view on Chinese stocks?
Gayed expects local investors to return to Chinese stocks as we continue to move farther away from the bitter memories of the COVID pandemic as well.
Concerns of political and regulatory uncertainties more recently have led to a broader narrative that Beijing is not really investable or is too speculative to say the least.
While such concerns are not entirely lost on Gayed, he held on to his contrarian view on Chinese equities as “everything is investable when the trend is up.”
Ultimately, the portfolio manager expects greed to overtake concerns around Chinese stocks and valuations to “matter more than any political ideology.”
Chinese stocks that may be worth watching in 2025
All in all, a whole bunch of factors point to the possibility of Chinese stocks outperforming the US in 2025.
The country’s government has been rolling out fiscal stimulus and reassessing its tech industry in pursuit of improving investor confidence.
Additionally, commitment to artificial intelligence that many believe will be a $1 trillion market over the next ten years, together with IT localization could contribute to Beijing doing well relative to the United States over the next four years.
Notable names like Alibaba, PDD Holdings, and JD.com have rallied in recent months and these factors combined suggest these stocks could extend their gains further as we move through the remainder of this year.
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