China’s stock markets are poised for further recovery as valuations normalize and government measures to curb industrial overcapacity begin to lift corporate profitability, according to a senior strategist at J.P. Morgan.

The bank’s chief China equity strategist said she expects the MSCI China Index to rise about 18% by the end of 2026, while the CSI 300 Index could gain roughly 12% over the same period. She also forecast that the MSCI Hong Kong Index may climb as much as 18%, supported by improving capital flows and a gradual rebound in sentiment toward Hong Kong’s property market.

The strategist added that earnings growth across the three major indexes is projected to reach 9% to 15% next year, reflecting expectations of stronger demand, improving margins, and more disciplined capacity management in key industries.

In a separate outlook released Tuesday, HSBC Global Private Banking set a target of 31,000 points for the Hang Seng Index by the end of 2026, a 22% increase from Tuesday’s closing level. The bank cited improving liquidity conditions and solid earnings momentum as primary drivers.

HSBC noted that China’s efforts to bolster domestic demand are likely to support corporate profit margins, while Hong Kong’s stabilizing property sector, expanding retail activity, increasingly active IPO pipeline, and a recovering tourism industry are expected to provide further tailwinds for the city’s economic rebound.

Both institutions said policy support and confidence recovery will remain critical to sustaining market momentum over the next two years.