Jefferies has taken a "modestly bearish" call on China, but it expects improving global trade, subdued inflation pressures and ongoing financial reforms will ensure the mainland's equity markets come out ahead of emerging market peers.
"Expectations of tightening in U.S. monetary policy, a firmer U.S. dollar and falling coal prices have generally been a positive for China's equity markets," it said.
(Read more: China shares may be cheap, but they could get cheaper)
Jefferies expects the U.S. dollar will strengthen as the market begins to expect interest rate increases in 2015. This, in turn, will weaken Asian exchange rates even as China's currency is likely to strengthen.
Expectations of monetary tightening in the U.S. have weighed on emerging markets over the past year. From May to September, expectations that the Federal Reserve would begin tapering its asset purchases spurred sharp declines in Asia's markets. China's market was generally insulated because its currency is not free floating.
But Jefferies noted that China's economy still faces headwinds. "Many of the reforms that China must undertake are ideological and therefore may take a lot longer to produce underlying economic improvements to standards of living and incomes," it said.