A-shares 2026 "Kickoff" - Institutions are optimistic about Chinese assets

Source: Economic Information Daily Reporter Wu Lihua

On the first trading day of 2026, the A-shares market opened with a strong start. On January 5th, the Shanghai Composite Index rose for the twelfth consecutive day, regaining the 4,000-point level. Nearly 4,200 stocks in the market advanced. By the close, the Shanghai Composite Index increased by 1.38% to 4,023.42 points, the Shenzhen Component Index rose by 2.24%, the ChiNext Index gained 2.85%, and the STAR 50 surged by 4.41%. The total daily trading volume of A-shares was 25.7 trillion yuan, about 500 billion yuan higher than the previous trading day.

Institutions Are Optimistic About Market Performance in 2026

Looking ahead to the entire year of 2026, institutions generally hold an optimistic view of the A-shares market. Li Huiyong, General Manager of the Research Department at Yangtze River Pension, told reporters that 2026 marks the beginning of the “14th Five-Year Plan” period. Considering the overall reduction in external uncertainties, supportive domestic liquidity conditions, and the gradual realization of policy effects, he is optimistic about the overall performance of the A-share market in 2026, expecting the main index to potentially increase by over 10%.

The recovery of macroeconomics and improvement in corporate profits are expected to be key drivers supporting the market’s upward trend. Since December 2025, multiple international organizations, including the World Bank and the International Monetary Fund, have raised their forecasts for China’s economic growth in 2026. These organizations generally believe that China’s economic growth still holds considerable potential. China International Capital Corporation (CICC) stated that the ongoing restructuring of the international order and domestic industrial innovation will continue to support Chinese assets. After some valuation repairs, the importance of fundamentals is further emphasized. With continued improvement in supply and demand across industries, the growth rate of non-financial corporate profits in 2026 is expected to increase, with overall profit growth for the A-shares possibly reaching around 4.7%. Structurally, more industries with high prosperity and approaching profit improvement inflection points, along with increased weighting of new economy sectors, are expected to support the index performance.

CITIC Securities research pointed out that the net profits of listed companies in 2026 are expected to continue improving, with an estimated annual growth rate of 4.8%. As CPI and PPI warm up in 2026, the pressure of price factors on corporate profits may gradually ease each quarter. With the gradual implementation of policies to expand domestic demand, the ROE of related sectors is expected to stabilize and rebound.

Valuation advantages are another important factor supporting the upward trend of A-shares. Data shows that, compared to major global markets, A-shares remain relatively undervalued. According to the latest research from Huaxi Securities, as of December 31, 2025, the PE (TTM) ratios of the Shanghai Composite Index, Shenzhen Component Index, and ChiNext Index were 16.59, 31.24, and 40.77 respectively, all near their historical medians since 2010. In contrast, the PE ratios of the S&P 500, Nasdaq, and Dow Jones Industrial Average were 29.18, 41.35, and 30.64, respectively, significantly higher than their historical medians since 2010.

The fundamentals and valuation advantages are expected to further attract global capital to increase allocations in Chinese stocks. CICC pointed out that since 2021, global funds have been overweight in U.S. stocks, while the allocation to Chinese markets has declined, with active funds underweight compared to passive funds. Under new technological and geopolitical narratives, A-shares, which have been undervalued and underweighted for years, may regain favor among global investors. Research from Huatai Securities shows that since 2025, ETFs investing in Chinese assets have attracted a net inflow of $83.1 billion. Among these, domestic ETFs received $78.6 billion in net inflows, while offshore ETFs saw about $4.5 billion.

Market Style Likely to Focus on “Technology+”

While the overall outlook remains bullish, different institutions have varying views on the market style for 2026. However, the general consensus leans toward “Technology+”—meaning technology stocks will still be the main theme, but the market will become more diversified.

Yang DeLong, Chief Economist at Qianhai Open Source Fund, stated that the 2026 market will be a continuation of 2025 but will also feature new characteristics. The core logic supporting the market’s upward trend remains unchanged, including policy support and China’s continuous breakthroughs in technological innovation. As the market deepens, the willingness of outside funds to enter will increase, driving more sectors higher, moving away from a scenario where technology stocks dominate alone. After surpassing 4,000 points, the index is expected to further expand upward, bringing more profit opportunities for investors and attracting continued accumulation by institutional investors such as social security funds, public funds, and private equity funds. Traditional blue-chip stocks will also present opportunities.

Li Huiyong believes that in 2026, the market will generally continue the style of 2025, with AI-related technology stocks remaining the main theme. However, compared to the highly concentrated market structure of 2025, a broader diffusion is expected. Additionally, due to economic recovery and previous supply capacity shortages, resource industries such as industrial metals and new energy metals are also expected to have high certainty.

Wai Jixing, Chief Strategy Analyst at Kaiyuan Securities, stated that in 2026, the capital market will shift from “asset revaluation” to “profit recovery.” “Technology first” remains the strongest mainline of this market rally, with relative profit advantages, overseas mapping, and global semiconductor cycle resonance supporting long-term growth. However, industry performance in 2026 is expected to be more balanced than in 2025, with dividend styles performing better in 2026.

CICC believes that the current global macro environment and innovation industry trends are still relatively favorable for growth styles. However, after more than a year of gains, valuations in growth sectors have increased significantly. Therefore, the style of the A-shares market in 2026 may become more balanced. Changes in macro environment and policy reforms are expected to bridge the “warmth gap” between new and old economies, with high-dividend strategies still offering structural and stage-specific opportunities.