China Daily | Analysts predict 'medium-term' recovery in China's A-Shares

Despite the recent market correction, analysts expect China's A-share valuations to recover in the medium-term and remain optimistic about Chinese equities.

From a macro perspective, China's reliance on oil and gas is low among major global economies and, at the index level, the impact of short-term oil price spikes on major A-share indices appears limited, according to Meng Lei, China equity strategist at UBS Securities.

"Considering China's macro stimulus, the spark of tech innovation, and ongoing reforms in capital markets and market value management, we expect A-share valuations to recover in the medium-term," Meng wrote in a recent research note.

"We project total A-share earnings growth to accelerate to 8 percent in 2026 in our base case. On the margin front, further supportive policies and progress on anti-involution could help improve margins in non-financial sectors," he added.

On Thursday, the Shanghai Composite Index ended at 3,889.08, slipping by 1.09 percent. The Shenzhen Component Index declined by 1.41 percent, closing at 13,606.44, while the ChiNext Index, which tracks China's Nasdaq-style board of growth enterprises, fell 1.34 percent to 3,272.49.

Although volatility in global financial markets remains very high, Kuang Zheng, chief investment officer for China at HSBC Global Private Banking and Wealth Management, said that historical data show conflicts in the Middle East may trigger short-term market volatility, but are unlikely to lead to a prolonged market correction unless they are followed by an economic recession or force the US Federal Reserve to resume interest rate hikes. HSBC considers the likelihood of such risks to be low.

Kuang noted that Asian markets, supported by strong growth momentum, robust domestic demand, pro-innovation technology policies, and attractive valuations, have become a preferred destination for investors seeking diversification.

"China is in a leading position in the global artificial intelligence race, and the 15th Five-Year Plan (2026-30) further underscores innovation as a key driver of high-quality development," he said. "We are optimistic about Chinese equities and adopt a 'barbell strategy', focusing on leading innovators as well as high-quality, high-dividend stocks.

"On the one hand, this allows us to capture China's structural growth opportunities; on the other, it provides stable dividend income to support portfolio performance."

https://www.chinadaily.com.cn/a/202603/27/WS69c6173ea310d6866eb403e5.html