JPMorgan’s Aiyengar sees global firms turning to China amid volatility

Global dealmaking is accelerating, with Asia Pacific ex-Japan M&A up 57% year over year in 2026 and LSEG counting a record 68 deals worth $10 billion or more last year. JPMorgan said Global Investment Banking revenue rose 38% in Q1, while China-linked partnerships, licensing and outbound acquisitions are expanding despite geopolitical friction. The article also highlights record Hong Kong listing pipelines and rising cross-border activity along politically aligned corridors.

Analysis

The key second-order effect is not just higher M&A volume, but a re-rating of “optionality” in sectors where western firms previously priced in geopolitical friction as a permanent tax. If cross-border deals increasingly route through politically aligned corridors, then China-linked assets with strategic IP but limited consumer exposure should see the lowest discount rate compression; that is supportive for bankers, advisers, and select pharma/tech platforms, while standalone subscale operators lose negotiating leverage. The scale premium also tends to concentrate activity into a smaller set of winners, which can widen valuation gaps between index-heavy mega-cap franchises and the long tail of mid-caps.

For JPM, this is a medium-duration earnings tailwind, not a one-day headline trade. Advisory and financing fees should be resilient for the next 2-4 quarters as boards rush to secure optionality before policy windows close, but the bigger upside is in cross-border underwriting and structured financing rather than pure M&A fees. The risk is that regulatory friction delays closings, which creates a “fee today, write-down tomorrow” pattern; that favors firms with diversified IB revenue and strong balance sheets over pure-play boutiques.

The contrarian miss is that a more constructive China deal narrative can be bearish for businesses that monetized deglobalization anxiety. If capital starts flowing toward partnership instead of duplication, demand for expensive in-house AI, cloud, and biotech buildouts may decelerate at the margin, especially for firms relying on full-stack vertical expansion. META is a useful example of the sort of strategic buyer that may face rising probability-adjusted costs for sensitive acquisitions, so the market may still be underpricing how often attractive targets become unavailable rather than how often deals get done.

Key Decisions for Investors

• Long JPM vs. regional broker-dealers for 3-6 months: JPM should capture the highest-quality cross-border fee pool and financing activity, with lower earnings volatility than smaller advisers if deal timing slips.
• Buy JPM Jan-2027 calls on pullbacks: favors a multi-quarter re-rating if Asia and China-linked transaction flow stays elevated; use defined downside premium rather than stock due to headline risk.
• Short META on strength for 1-2 months, or buy puts into deal-rumor spikes: the setup is asymmetric because regulatory veto risk is binary and can erase optionality premium quickly.
• Pair long selected China-exposed industrial/healthcare advisors with short domestic-only advisory names over 6 months: the market should continue paying up for firms that can intermediate cross-border complexity.
• Avoid chasing pure M&A beta in small-cap bankers; if entering, size as a basket and hedge with a broad financials index because the main risk is deal-delay, not deal-cancel.