As excitement over DeepSeek moderated, JPMorgan gave its clients a warning: “Be careful: U.S.-China risks back in focus.” The Feb. 24 note cautioned that the White House’s new America First Investment Policy could trigger a pullback in Chinese stocks after the recent rally. Indeed, on Thursday U.S. President Donald Trump said an additional 10% tariff on Chinese goods would be coming on March 4. Duties of 25% on Canada and Mexico would also be implemented on that date, he said. Stocks in Hong Kong and mainland China fell Friday on the news. JPMorgan’s stock recommendations for names to add included three Chinese real estate-related companies: U.S.-listed KE Holdings and China Resources Land and China Overseas Land and Investment (known as CR Land and Coli, respectively) both traded in Hong Kong. The investment firm rates all three stocks overweight. KE Holdings operates a major brokerage for apartment rentals and home sales in China. CR Land and Coli are two state-owned companies that develop and manage residential and commercial properties in China. “In the coming weeks, we anticipate that Defensive and Value may outperform Growth and that A-shares may outperform offshore listed China/HK equity indices while the market debates downside related to the new” America First Investment Policy, JPMorgan’s chief China equity strategist Wendy Liu and a team wrote in the report. Hong Kong’s Hang Seng Index was down 2.3% for the week after hitting a three-year high Thursday. The CSI 300 index of major Shanghai and Shenzhen-listed stocks fell 2.2% for the week. “We believe China is the real focus of the Trump administration and posit that a significant worsening of tensions between the worlds’ two largest economies might be inevitable,” Ting Lu, chief China economist at Nomura, said in a note Thursday afternoon Beijing time. “While markets currently appear to be ignoring these risks, they could come to the forefront in coming months,” he said. The new America First Investment Policy has also caught analysts’ attention for its revived focus on Chinese companies with alleged Chinese military affiliations, and on an audit dispute that recently threatened the delisting of Chinese stocks in the U.S. That issue was resolved temporarily in late 2022. “Rising U.S. policy uncertainty, including tariff risks, underscores the importance of [China] delivering forceful macro policy stimulus, boosting private sector confidence, and aiding high-quality and tech (AI) development,” Goldman Sachs analysts said in a Feb. 25 note. In a separate report the following day, the analysts detailed several stock baskets, including one for Asia Pacific ex-Japan domestic consumption that could benefit from additional support due out at China’s so-called Two Sessions that kicks off in the week ahead. The top three Chinese names by basket weight, at 10% each, are Meituan Dianping , Chinese e-commerce giant Alibaba and its rival PDD Holdings . Hong Kong-listed Meituan Dianping operates apps for food delivery, discovering nearby attractions and getting restaurant deals. The Goldman basket picked Alibaba’s Hong Kong-traded shares, while Pinduoduo and Temu parent PDD trades in the U.S. Coincidentally, analysis from HSBC found that while U.S. investors have the largest positions in Alibaba, Tencent and Meituan, most of the positions are via U.S. mutual funds and are not affected by the White House’s latest policy focus on investments by government pensions and endowment funds. Despite looming U.S. tensions, China’s economic outlook will be front and center in the week ahead. On Wednesday, China is expected to officially raise the deficit and detail stimulus plans , but acknowledge weaker domestic demand with the softest inflation outlook in just over 20 years. The moves follow a high-level directive in September to halt the property sector’s decline. Macquarie’s chief China economist Larry Hu shared Friday three positive signals for the housing market with growing hopes for a bottom this year. He pointed out that housing inventories are due to return to normal levels by the end of the year, while policymakers keen on stopping the decline now seem willing to bail out Vanke, a major developer. In addition, Hu said that rental yields are starting to climb above that of China’s 10-year government bond yield, making housing more attractive relative to other long-term assets. Foreign capital is starting to act on new Chinese real estate investment opportunities, particularly given a Beijing policy push to increase rental housing . Invesco last week announced its real estate investment arm formed a joint venture with Ziroom, a Chinese company known locally for its standardized, modern-style apartment rentals. Part of the opportunity comes from how traditional developers are less financially able to participate right now, Calvin Chou, head of APAC, Invesco Real Estate, said in an interview. “We think there’s a good runway here.” The joint venture, called Izara Holdings, plans to initially invest 1.2 billion yuan (about $160 million) in a 1,500-room rental housing development near one of the sites for Beijing’s Winter Olympics, with a targeted opening of 2027. Ziroom’s digital system allows the company to quickly assess regional factors to improve operational efficiency of the rental units and control investment risks, Ziroom Asset Management CEO Meng Yue said in a statement, adding that joint venture plans to tap not only a new stage of China’s real estate market, but eventually overseas markets. Ziroom is privately held. It’s a client of KE Holdings, which disclosed in annual reports that it has sold online marketing and agency services to Ziroom. — CNBC’s Michael Bloom contributed to this report.
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