Deutsche Bank expects Chinese and Southeast Asian equities to outperform across Asia in 2026, driven by improving liquidity and a policy shift toward economic reform. China remains in a "bull upcycle," supported by high household bank deposits and slowing capacity expansion, which is helping corporate profits stabilize. The bank points to Beijing's move away from heavy industry oversight and toward consumption-led growth as a key tailwind.

Measures like faster payment cycles for state-owned enterprises and policies to reduce oversupply are already showing signs of restoring margins.Southeast Asia also benefits from stronger industrial discipline and selective foreign inflows. Deutsche Bank believes global investors still underweight China, estimating a 1% reallocation could drive $270 billion into the market. The forecast hinges on continued fiscal easing and rate cuts globally, potentially pushing Chinese and Hong Kong stocks beyond previous peaks.

However, the bank remains cautious on high-tech sectors facing renewed supply pressures.