China stock market ran ahead of macro fundamentals, says BofA

March 22, 2025 05:55 AM AEDT | By Investing

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China stock market ran ahead of macro fundamentals, says BofA

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Investing.com -- Bank of America cautioned that China’s equity market rally has outpaced underlying macro fundamentals, with looming tariff risks potentially testing market resilience in April.

Despite better-than-expected January-February activity growth indicators, recent data on imports, inflation, and bank loans have been disappointing, BofA said.

While fiscal support remains intact following the National People’s Congress, the firm noted limited clarity from the State Council’s consumption policy action plan rolled out on March 16.

Tariff risks could weigh on sentiment, with concerns that U.S. President Donald Trump may impose additional tariffs on April 2, adding to the 20% blanket tariffs since his inauguration.

BofA also warned that other countries may hike tariffs on Chinese imports to gain concessions from the U.S., adding further pressure on China’s exports.

BofA maintained its 2025 GDP growth forecast at 4.5% but lowered its Q1-Q2 growth estimates by 10-20 basis points, expecting the initial tariff shock to be more evenly distributed.

Analysts see potential for further policy easing to support domestic demand and curb deflationary pressures.

Despite risks, BofA highlighted upside potential from increased investment in labor-saving technologies and a rebound in risk appetite.

However, the firm cautioned that any escalation of tariffs or additional policy uncertainties could impair global trade growth and dampen China’s economic outlook.

This article first appeared in Investing.com

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