CHINA: Catch-Up Potential Remains AttractiveHang Seng IndexHSI:HSISwissquoteAs the U.S. stock market trades at all-time highs and has returned to its valuation levels of late 2021 (before the 2022 bear market), it may be wise to look at the Chinese stock market as a way to diversify your portfolio. Regarding the analysis and potential of the S&P 500 Index, I encourage you to read my latest forward-looking study by clicking on the image below. Don’t forget to subscribe to our Swissquote account to be notified every morning when our new daily market analysis is published. https://www.tradingview.com/chart/ES1!/wwgSN9WJ-S-P-500-what-target-for-the-end-of-2025/ Let’s now turn back to the Chinese stock market. I believe Chinese equities still offer medium to long-term upside potential, both technically and fundamentally. 1) Strong catch-up potential from a fundamental valuation perspective The Chinese stock market presents an interesting diversification opportunity from a valuation standpoint, with a Shiller PE ratio (CAPE) of 15 compared to 36 for the S&P 500. Chinese equities are significantly cheaper than U.S. equities and also benefit from an ultra-accommodative monetary policy from the People's Bank of China and an expansionary fiscal policy by the Chinese government. These are key fundamental factors that support strong upside potential for Chinese equities. 2) From a technical standpoint, the ATH is the natural target for Chinese indices Focusing on the technical analysis of the Shenzhen Composite Index (weekly chart), the setup is clear: a trading range between support at 7,500 points and resistance at 16,000 points. The market has recently built a bullish reversal pattern at the lower bound, making the upper range the natural technical target. 3) Yuan strengthening in Forex is a positive signal for Chinese equities Finally, one more factor supports Chinese equities from a diversification angle: currency effect. The Yuan Renminbi is technically strengthening, and the USD/CNY pair has just rejected long-term resistance. As a result, international investors could benefit from a stronger CNY in the coming months. DISCLAIMER: This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. 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