Why Chinese stocks will climb another 50% from current levels, research CEO says

Chinese stocks are poised for a huge run-up in the next year, according to Renaissance Macro’s Jeff deGraaf.

The research firm CEO said perfect conditions are aligning for additional gains exceeding 50%.

Other notable investors have been looking to buy the dip in Chinese stocks amid continued stimulus efforts.

China’s stock rally isn’t over — and the nation could have the perfect cocktail of ingredients to stage a monster run-up over the next year, according to one Wall Street forecaster.

Jeff deGraaf, the CEO of Renaissance Macro Research, says he sees China’s benchmark stock index climbing to 6,000 over the next year. That implies a 54% increase from the CSI 300’s current levels, thanks to the right mix of conditions in Beijing that should power equities higher, he told Bloomberg on Friday.

“Skepticism, valuation, stimulus, momentum and a trend change,” deGraaf said of China’s investing environment, adding that it was “one of the best set-ups” he’s seen over his 35-year career.

Chinese stocks have been on a roller coaster in recent weeks after Beijing announced its latest monetary stimulus package, which included lowering interest rates and pumping the stock market with $114 billion. The package sparked the steepest rally in Chinese stocks since 2008 before it quickly fizzled, a sign investors were disappointed Beijing didn’t announce more stimulus measures.

Markets, though, are expecting the nation to announce a fresh fiscal stimulus package at a briefing on Saturday, potentially reviving the bull case for stocks. Most investors expect China to add 2 trillion yuan, or $283 billion, in fiscal stimulus through 2025, according to a Bloomberg poll of market participants.

“We see the policy response as self-preservation, a reaction to the weakness and a potential Mario Draghi-esque ‘Do what it takes’ moment for China,” deGraaf said, later urging investors to “keep stops in place” when betting on Chinese stocks.

Other traders on Wall Street have shown interest in buying the dip in Chinese equities, despite fear that Beijing’s economic slowdown could stick…

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