CHINA’S equity benchmark can climb out of its first bear market since former U.S. President Donald Trump’s trade war to reach a record high within the next 12 months as earnings improve and monetary policy eases, according to JPMorgan & Chase Co.

Earnings estimates for the CSI 300 Index have risen over the last few months to portend about 20 percent year-on-year profit growth from about 17 percent previously, Wendy Liu, chief China equity strategist at JPMorgan Chase & Co., said.

“If you apply 13 times multiple on that growth, you get more than 20 percent upside on CSI 300,” she said. Shares of “materials, financials and industrials are helping to create that incremental upside,” she added.

Liu said divergence in monetary policy between China and the United States increases the odds of China front-loading easing initiatives to support economic growth.

She sees room for gains in stocks tied to China’s reopening, infrastructure spending and housing recovery, while companies linked to green energy will face more competition.

JPMorgan’s stance adds to expectations that China’s regulatory actions have peaked and monetary policy will ease, offering the prospect that investors can recoup losses exacerbated by concerns over a slowing economy, COVID-19 and the property sector’s debt.

The CSI 300 hasn’t seen any significant gains after falling into a bear market last month, even as it trades close to its cheapest price-to-earnings valuation since mid-2020.

The gauge has lost about 7 percent this year and needs to climb 27 percent to exceed its all-time high close of 5,877.20 hit in 2007 before the global financial crisis. (SD-Agencies)