Gold and Chinese stocks still have room to rise, CICC says

Investors should adopt overweight positions in gold and Chinese stocks, as the outlook for these assets remains positive despite short-term challenges, according to investment bank China International Capital Corporation (CICC).

While concerns about stretched valuations for gold and Chinese stocks emerged following recent rallies, strategists at CICC's research unit said that both assets offered growth potential and diversification value.

Gold's price has risen more than 10 per cent this year to nearly US$3,000, following a 26 per cent surge in 2024 - the biggest gain in 14 years. Driving the increase were the asset's long-term hedge nature against inflation amid US President Donald Trump's inflation-prone policies and threat of tariffs, said Li Zhao, chief asset allocation strategist at CICC Research.

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"Gold can still maintain a long-term upwards trajectory," Li said. "There may be two-way fluctuations in the short term, but the mid to long-term bull market remains unchanged."

He added that gold prices could continue to rise in the next decade.

Global central banks' demand for gold had grown, and Asian central banks in particular still had considerable room to increase their positions compared with their US and European counterparts, Li said.

Gold comprises only single-digit or low double-digit percentages of the foreign exchange reserves of the central banks in Asia-Pacific, such as Japan and India, Li said. Meanwhile, the tally in developed markets in Europe and the US could be more than 70 per cent, he added.

"Given the changing global landscape and inflationary pressures, we expect central banks to continue purchasing gold for several more years," Li said.

An office of China International Capital Corporation is pictured in Beijing on October 28, 2020. Photo: VCG via Getty Images alt=An office of China International Capital Corporation is pictured in Beijing on October 28, 2020. Photo: VCG via Getty Images>

Gold also represented low correlation with most assets and provided an annualised return of about 8 per cent over the past 20 years - higher than bonds and commodities, according to Li. "Gold is an asset with long-term strategic allocation value," he said.

As for Chinese stocks, the nation's biggest investment bank said their attractive valuations, diversification value and ongoing innovation supported a healthy outlook.