What will be the year’s most appealing asset class, gold or Chinese stocks? It will probably be Chinese stocks – as an ongoing economic recovery in the world’s second-largest economy gathers strength and boosts corporate earnings and the appetite for risk assets – according to Shanghai-headquartered Haitong Securities. While a 33 per cent jump in the precious metal this year is currently ahead of the 11 per cent gain on China’s benchmark Shanghai Composite Index, a dim outlook for global growth because of the coronavirus pandemic has cast doubt on a comeback by inflation, a key factor needed to sustain a further run-up on gold and other commodities, Xun Yugen, a strategist at the brokerage, said. China’s successful containment of Covid-19, which has infected about 20 million people worldwide, will further buoy its economic and earnings growth, he said. Profit growth at mainland China-listed companies will probably accelerate to 13 per cent this quarter and 20 per cent for the following three-month period, compared with a 3 per cent decrease in the second quarter, Xun said. “Loose liquidity and an improvement in fundamentals will continue to drive up stocks,” he said. China’s yuan-denominated “A shares will be more attractive than gold going forward”. Gold has been on a roll this year, beating every major asset class from stocks to bonds, following the release of unprecedented liquidity by central banks globally aimed at staving off an economic recession, as well as rising demand for safe-haven assets amid escalating tensions between China and the United States. The Shanghai Composite, however, has also been the best performer among the world’s primary equity benchmarks in 2020. On Monday, gold futures added 0.6 per cent to US$2,022.80 in Asian trading hours, stabilising from a 2 per cent decline in the previous session. The Shanghai Composite rose 0.8 per cent to 3,379.25 for the day. An investment banker who correctly predicted China’s stock crash in 2015, on the other hand, prefers gold to equities. Hong Hao, managing director at Bocom International Holdings, the investment banking unit of state-owned Bank of Communications, said Chinese shares are facing headwinds from both US-China tensions and a technical resistance. A further gain on stocks might be limited, as the Shanghai Composite might meet resistance at 3,500, which is within 4 per cent of the index’s Monday close, he said. “Stocks may have to wait for some time. They are running into very strong resistance,” Hong said. “Chinese stocks will continue to face strong resistance from a trading perspective, amid headline risks.” Gold on track for its best quarter since 2016, flirts with key US$1,800 an ounce level The bull run in gold will continue in the long term, according to Founder Securities, because of unparalleled monetary policy easing and uncertainty in the global economy. The precious metal might rise by another 10 per cent this year, as investors seek safe havens in the lead-up to the US presidential election and demand for bullion enters a peak season in September and October in India, the world’s largest consumer, said Chen Li, chief economist at Soochow Securities.