Chinese Stock Charts Reach a Turning Point. What to Watch. — Barrons.com

Investors should be more selective when picking Chinese tech stocks this year, Barclays analysts say in a research note. Government policies to drive economic recovery were a tailwind for Chinese tech stocks in 2025 and drove broader gains, the analysts say. "The consumption stimulus money has now been spent, and structural changes are always difficult to make and results take longer to show up," they say. As a result, there will unlikely be broad-based strong returns for most Chinese ADRs, they note. The analysts reckon that China's EV makers face significant headwinds in 2026 as Beijing cuts back on sales tax incentives and EV penetration tops 50%. Barclays prefers names that have resilient revenue streams such as Tencent and Trip.com, or those with a clear AI story such as Alibaba. (sherry.qin@wsj.com)

Goldman Sachs expects China's 10 large cap private enterprises to perform well in 2026 and beyond, thanks to an easing regulatory stance toward the private sector and breakthroughs in AI. These companies, namely Tencent, Alibaba, CATL, Xiaomi, BYD, Meituan, NetEase, Midea, Hengrui and Trip.com, are seen to further increase their dominance in China's stock market, similar to the Magnificent 7 stocks in the U.S. The group, dubbed the Chinese Prominent 10, is forecast to deliver earnings growth of 13% on a compound annual basis in 2026-2027. GS also sees scope for further global market-share gains by Chinese companies, citing export strength. About half of the Chinese Prominent 10 are well positioned to benefit, given their strong balance sheets, cash flows, scale advantages and leading technologies, they say. (jason.chau@wsj.com)

By Reshma Kapadia

International stocks saw surprisingly strong gains in 2025, with equity markets in export-driven countries such as Korea and China outpacing the S&P 500 even after the U.S. imposed the highest tariffs seen in decades. Non-U.S. markets could rally further in 2026, fueled by falling interest rates and rising corporate earnings.

The MSCI AC World ex-USA index returned more than 32% in 2025, nearly double the 18% total return of the S&P 500. Some foreign markets did far better, with the iShares MSCI South Korea exchange-traded fund up 95% and the iShares MSCI Brazil ETF ahead 49%. A weaker dollar helped returns but wasn't the only driver.

The past year marked the end of a 15-year stretch in which foreign markets lagged behind the U.S. — a reversal that could nudge more U.S. investors to look overseas for growth. In many markets, they will find less richly valued plays on artificial intelligence and electrification and improving economic and financial conditions.

Strategists at J.P. Morgan expect double-digit gains in 2026 across developed and emerging markets, spurred by robust earnings growth, lower interest rates, and fewer policy risks such as tariffs. Bargain-oriented investors such as Warren Chiang, manager of the GMO International Value fund and similarly named ETF, also see plenty of opportunity internationally.

In part, that's because non-U.S. markets are still relatively cheap. The MSCI World ex-U.S. index is trading for 15.6 times next year's expected earnings, roughly the same valuation as before its 2025 run. That reflects improving earnings and expanding price/earnings multiples, Chiang says.

The MSCI U.S. index sports a price/earnings multiple of about 23.

Across international markets, there is evidence of an improving backdrop. President Donald Trump's foreign and trade policies sparked a reset in Europe, where policymakers have pledged significant fiscal stimulus, including an increase in defense spending.

J.P. Morgan's Mislav Matejka, head of global and European equity, expects 10% to 20% earnings growth for the euro zone in 2026, as earnings benefit from fiscal stimulus and improving financing conditions, tariff risks diminish, and China's economy shows signs of stabilizing. An end to the Russia-Ukraine conflict would be an added plus.

The iShares MSCI Japan ETF returned 26% in 2025, but investors see more room for Japanese stocks to rise. Japan's recently elected prime minister, Sanae Takaichi, has business-friendly plans to lower taxes and offer incentives to bolster investment.

China's economy is still struggling, as evidenced by November's weak economic data. While Beijing is unlikely to unleash stimulus, recent comments from officials suggest the government has grown more serious about prioritizing a revival in domestic demand alongside a continued push for technological self-reliance. China has invested heavily in artificial intelligence, biotechnology, and other technologies.

Chinese AI stocks outperformed U.S. AI stocks this past year, but investors aren't fretting about a possible AI bubble in China, says Jitania Kandhari, head of macro and thematic research for emerging markets equity at Morgan Stanley. In China, the stocks' gains owed largely to rising price/earnings multiples. Shares will look cheap if earnings growth accelerates, Kandhari says.

Chinese tech earnings have bottomed after several years of declines, and recent results from cloud companies suggest reasons for optimism, she says.

While growth stocks have propelled U.S. indexes this year, value stocks have led markets higher in Europe and Japan. GMO's Chiang says he is still finding cheap companies overseas with good businesses, hefty margins, and significant competitive advantages. His top holdings include Germany's Deutsche Bank and Spain's BBVA, and Japanese industrial firms that are benefiting from reordered supply chains and government reforms.

Luiz Sauerbronn, a manager of the $2 billion Brandes International Equity fund , favors luxury-goods companies such as Kering, whose flagship Gucci brand has been hurt by weakness in China and a poor reception to recent collections. That created an air pocket in the stock, which has fallen by nearly half in the past five years, but was up 26% in 2025. Gucci, he notes, has recovered from setbacks in the past. Plus, Kering has a new CEO, Luca de Meo, formerly of Renault, who is trying to repair the company's balance sheet.

Richard "Trip" Clattenburg, manager of the $13.6 billion T. Rowe Price International Stock fund, likes quality stocks, many of which were more expensive, and thus overlooked when the rally in foreign stocks started last year. "There aren't many times when you get shots at relatively lower-risk, high-quality assets," he says.

Among Clattenburg's holdings: Unilever, which has new management, a road map for volume growth, and a 3.6% dividend yield. Clattenburg also owns Japan's Nippon Sanso Holdings, which makes industrial gases and has a lower valuation than larger rivals such as Air Liquide. He expects the company to get a lift from Japan's more business-friendly moves, but says the valuation provides a cushion if the global economy starts to sour.

Emerging market stocks still trade at a steep discount to the S&P 500, despite a preponderance of technology stocks in these markets. Within China, investors see opportunity in early adopters of AI. "China is a super-app country; it is harnessing [AI] in media, e-commerce, gaming, and travel," says Kandhari, who says semiconductor and semi-equipment companies, robotics, biotech, healthcare, and consumer-oriented digital platforms are among the beneficiaries. Brandes' Sauberbronn likes the outlook for Alibaba Group Holding, even after the stock's 75% rally in 2025, noting that near-term earnings are depressed because of the company's use of large subsidies to spur growth in its core e-commerce business. But the initiative is showing early signs of success. Alibaba also benefits from its strong position in AI with a "full stack model" that provides compute power, a cloud platform, AI models, and applications, he says.

India and Brazil aren't AI-focused markets and could fare better if the AI trade loses steam. India's market lagged behind in 2025 due to the negative impact of U.S. tariffs, sluggish economic growth, and investors' reallocation of assets to China. But T. Rowe's Clattenburg notes that the government and Reserve Bank of India are both pro-growth. Axis Bank is a private-sector bank that has cleaned up its loan book and should be an early beneficiary of an economic pickup, he says.

Brazil's market is tilted toward commodities and should continue to benefit as the push for electrification gains momentum. Also, inflation is expected to ease, which means monetary policy could loosen, helping stocks, says J.P. Morgan. Another plus: The Trump administration's focus on increasing influence in South America could mean more foreign direct investment, and an easing of the 50% tariffs President Donald Trump imposed on Brazilian goods earlier this year.

The Vanguard Total International Stock ETF (VXUS) offers an inexpensive way for U.S. investors to gain broad exposure to international markets, with about a quarter of its assets in emerging markets. Capital Group International Core Equity ETF (CGIC) provides a broad-based strategy, with about half its weighting in Europe and the U.K.

For investors who favor actively managed funds, three options include the $986 million GMO International Equity Fund IV (GMCFX), which has returned an average of almost 25% a year in the past three years, beating 99% of its peers; Brandes International Equity fund (BIEAX), which returned 24% a year in the same span and beat 98% of its peers; and the $16.7 billion T. Rowe Price International Value Equity fund (TRIGX), which averaged an annual return of almost 22% in the same three years, outperforming 86% of its peers, according to Morningstar.

Write to Reshma Kapadia at reshma.kapadia@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

By Jack Denton

Alibaba stock fell on Wednesday but was still set to close out its best year since 2017 amid a remarkable rebound in the Chinese technology giant's shares following years of underperformance.

Alibaba's American depositary receipts — or ADRs, essentially the U.S.-listed stock — shed 0.5% in Wednesday's premarket after a 0.8% decline on Tuesday. Investors have little to complain about, though, because the stock remains up almost 75% this year.

The last time Alibaba had a year this good, it later turned ugly. The stock price almost doubled in 2017, rising 96%, but crumbled in 2018 with a 21% retreat.

But history is nothing to fret about, especially after Alibaba's rally this year fueled by a pivot to artificial intelligence that was a relief to long-suffering investors.

While the shares are trading at their highest levels since late 2021, the stock — which closed above $147 on Tuesday — is still at less than half its October 2020 peak above $300. The years following the record high brought regulatory crackdowns that slammed the Chinese tech sector, with a slowdown in China's economy making matters worse.

China's growth remains an important factor for Alibaba, which still has a core business in online retail that is sensitive to consumer sentiment in the world's second-largest economy.

In "bad news is good news" style, the shares have recently benefited from signs of a growth slowdown in China's economy that could spark stimulus measures from Beijing. That narrative may have been flipped on its head with recent economic data showing growth that may temper stimulus hopes.

China's National Bureau of Statistics revealed on Wednesday that factory activity jumped unexpectedly in December, reversing eight consecutive months of declines. The official purchasing-managers' index ( PMI) rose to 50.1 in December — with any print of 50 or above marking expansion.

Write to Jack Denton at jack.denton@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

By Sherry Qin and Tracy Qu

Hong Kong stocks ended 2025 with a second consecutive annual gain, posting their best performance since 2017 in percentage terms, thanks to a tech rally fueled by artificial intelligence.

The city's benchmark Hang Seng Index finished the year up 28%, making it one of Asia's best performing markets.

In Mainland China, the benchmark Shanghai Composite Index rose 18% for the year, marking its strongest performance since 2019, after reaching its highest closing level in a decade in August. The Shenzhen Composite Index 29%, while the tech-heavy ChiNext Price Index surged 50%.

China's advances in artificial intelligence, its continued push for technological self-reliance and resilience in global trade have helped boost investor confidence, easing concerns over weak domestic demand and persistent deflation.

China's goods trade surplus topped $1 trillion for the first time in the year through November, underscoring the strength of its manufacturing base despite President Trump's steep tariffs on Chinese goods.

Investor sentiment was further buoyed by a trade truce reached in October following the first face-to-face meeting in six years between President Trump and Chinese leader Xi Jinping.

"A one-year trade truce--albeit temporary--is positive for sentiment as it reduces concerns around the uninvestability" of Hong Kong and China stocks, Nomura analysts said in a research note.

Despite lingering geopolitical uncertainty, Chinese tech stocks have shone this year since the so-called "DeepSeek moment" in January, when the Chinese startup released a large language model seen as a rival to OpenAI's ChatGPT. Beijing has since made technological self-sufficiency a priority in its next five-year plan beginning in 2026, further fueling investor enthusiasm surrounding artificial intelligence.

"AI has changed the game for Chinese tech equities," Goldman Sachs analysts said in a recent note.

Alibaba Group and Tencent Holdings, widely seen as proxies for China's AI development, rose 73% and 43.65%, respectively. Baidu, which operates the AI chatbot Ernie Bot, gained 59% over the year.

Trade relations between the two countries remain strained as Beijing's top cybersecurity regulator earlier in the year urged big tech companies not to buy Nvidia's chips. Chinese chipmakers have emerged as major beneficiaries of that development.

Shares of SMIC, China's largest contract chip maker, more than doubled in Hong Kong this year. Moore Threads and MetaX, two Chinese AI chip startups that made blockbuster market debuts earlier this month, ended the year up more than 400% from their listing prices.

The AI frenzy has also driven a fresh wave of listings, spanning companies involved in large language models, robotics and biotechnology. Hong Kong reclaimed the top spot in the global IPO market for the first time since 2019, according to a recent KPMG report.

"We expect this upward trend to continue into 2026," said KPMG China's Paul Lau. "In particular, the pace of AI-related listings is poised to accelerate as the technology matures and is adopted more widely across various industries."

Chinese AI model developers MiniMax and Zhipu have already secured IPO slots for January 2026.

Still, risks remain. China Vanke's recent struggles, including a near-default and request for debt extensions, have renewed concerns that the country's prolonged property downturn has yet to bottom out. Hong Kong's Hang Seng Mainland Properties Index ended the year up 5.2%, lagging the broader market.

As startups rush to go public, artificial intelligence is set to remain a dominant theme for Chinese and Hong Kong markets in 2026. Analysts say a sustained rally will also hinge on whether China can revive domestic demand and stabilize its property sector.

After two consecutive years of positive returns, China has shown global investors that it remains investible, with a slow bull market likely in the making, the Goldman analysts said.

Write to Sherry Qin at sherry.qin@wsj.com and Tracy Qu at tracy.qu@wsj.com

BEIJING (dpa-AFX) - MiniMax, a Chinese AI startup, said on Tuesday that it is reportedly looking to bring in Alibaba Group Holding (BABA) and the Abu Dhabi Investment Authority as cornerstone investors for its upcoming IPO in Hong Kong.

They aim to raise over $600 million and could start taking orders from investors as soon as Wednesday, gearing up for a listing in January.

Other expected backers include IDG Capital, Perseverance Asset Management, and South Korea's Mirae Asset.

MiniMax has managed to stay afloat amid the fierce generative AI price war in China, raking in $30.5 million in revenue last year as it works to become the first generative AI startup to go public in the country.

BABA is currently trading at $148.90, up $0.42 or 0.28 percent on the New York Stock Exchange.

Copyright(c) 2025 RTTNews.com. All Rights Reserved

Copyright RTT News/dpa-AFX