Introduction to the 2025 Chinese Equity Landscape

As we step into 2025, the Chinese equity market presents a mixed yet promising picture. While geopolitical tensions and tariff disputes loom large, the outlook remains constructive, supported by policy easing, undemanding valuations, and light positioning. This report dives deep into the strategies and investment themes shaping the market, with a focus on key companies that stand out as opportunities for investors.

Investment Strategies and Themes

The report outlines a barbell strategy, balancing defensive yield stocks during market volatility with growth and high-beta stocks during periods of trade truce and negotiation. Key investment themes include:

• Defensive Yield Stocks: These stocks cushion market volatility while awaiting more policy clarity.
• Internet and Platform Companies: Acting as proxies for China’s consumption recovery, these companies ride on cyclical upswings.
• Policy Beneficiaries: Companies benefiting from government spending and consumer stimulus programs.

Deep Dive into Listed Companies

China Mobile (941 HK)

China Mobile stands out in the defensive yield category, with a forward P/E of 11.0x for 2024 and an expected improvement to 10.5x in 2025. The company boasts a dividend yield of 6.6% in 2024, rising to 7.1% in 2025, making it a strong candidate for income-focused investors. Its return on equity (ROE) is also solid at 10.2% in 2024 and 10.4% in 2025. The recommendation is to “Buy” as its valuation remains attractive, supported by a stable outlook.

China Telecom (728 HK)

China Telecom offers a forward P/E of 12.3x for 2024, moving to 11.4x in 2025. Its dividend yield is projected at 5.9% in 2024 and 6.4% in 2025, with ROE improving slightly from 7.3% to 7.6%. The company’s stable earnings and high dividend yield align well with the defensive yield strategy, making it another compelling choice for investors. The recommendation remains positive for China Telecom.

Alibaba Group (9988 HK / BABA US)

Alibaba is highlighted as a key player in the internet and platform category. Its forward P/E is 9.9x for 2024, dropping to 8.8x in 2025, indicating attractive valuation levels. The company is expected to deliver consistent earnings growth, supported by disciplined cost control and a strong focus on shareholder returns through share buybacks. Alibaba leverages artificial intelligence and large language models to enhance operations and monetization. The recommendation is to “Buy” for both the HK-listed and US ADR shares.

JD.com (9618 HK / JD US)

JD.com features prominently in the growth stock category. Its forward P/E is 9.2x for 2024, reducing to 8.3x in 2025, with a dividend yield of 2.5% in 2024 and 2.7% in 2025. The company has demonstrated strong fundamentals through disciplined cost control and is well-positioned to benefit from domestic consumption recovery. Both the HK-listed and US ADR shares are recommended as “Buy.”

Tencent Holdings (700 HK)

Tencent is another standout in the internet and platform space. With a forward P/E of 16.9x for 2024 and 15.3x for 2025, the company combines growth potential with stability. Its ROE remains robust, decreasing slightly from 21.3% in 2024 to 19.9% in 2025. Tencent’s focus on AI integration and ecosystem development strengthens its position as a China consumption proxy. The recommendation is to “Buy.”

Meituan (3690 HK)

Meituan is positioned as a high-growth stock with a forward P/E of 20.1x in 2024, dropping to 16.2x in 2025. The company’s investments in AI and its dominant position in e-commerce make it a compelling choice for investors seeking exposure to China’s consumption recovery. Meituan remains a “Buy” recommendation.

Trip.com (9961 HK / TCOM US)

Trip.com is a strong candidate in the online travel agency (OTA) space. Its forward P/E is 19.0x for 2024, improving to 17.7x in 2025. The company is expected to benefit from a cyclical recovery in travel demand and continues to deliver solid revenue and earnings growth. Both the HK-listed and US ADR shares are recommended as “Buy.”

China Construction Bank (939 HK)

China Construction Bank is favored for its defensive characteristics, with a forward P/E of 4.3x for 2024 and 4.2x for 2025. The bank offers a high dividend yield of 7.0% in 2024 and 7.2% in 2025, making it a solid choice for income-focused investors. Its ROE remains consistent at around 10%. The recommendation is positive for this state-owned institution.

China Railway Group (390 HK)

China Railway Group is positioned as a policy beneficiary, particularly from increased government spending on infrastructure. Its forward P/E is incredibly low at 2.9x for 2024, dropping further to 2.8x in 2025. The company’s dividend yield is steady at 6.0%, with an ROE of 8.8% in 2024 and 8.5% in 2025. The recommendation is to “Buy.”

China Resources Power (836 HK)

China Resources Power is another standout in the defensive yield category. Its forward P/E moves from 5.9x in 2024 to 5.3x in 2025, with a dividend yield of 6.5% in 2024 and 7.4% in 2025. The company’s focus on renewable energy positions it well for long-term growth. The recommendation is to “Buy.”

Hong Kong Exchanges and Clearing (388 HK)

HKEX is a high-beta stock expected to outperform during periods of trade truce and settlement. Its forward P/E is 28.3x for 2024, reducing slightly to 26.7x in 2025. The company is poised to benefit from a recovery in IPO activities and average daily turnover. The recommendation is to “Buy.”

Conclusion

The Chinese equity market in 2025 offers a range of opportunities for investors, from defensive yield plays to high-growth internet companies. With a comprehensive strategy and keen attention to policy developments, the market presents a promising outlook despite geopolitical challenges. Each of the companies analyzed in this report offers unique potential, making them valuable considerations for a diversified investment portfolio.