Analysis
BEIJING – China’s equity market kicked off 2026 with strong momentum, reinforcing growing confidence among domestic and international institutions, with technology-related sectors broadly regarded as the primary growth driver.
Yesterday, China’s A-share market hit fresh records, with the benchmark Shanghai Composite Index up 0.05 percent to 4,085.77 points, marking its highest level in over a decade. The index also logged its 14th consecutive daily gain, surpassing the previous record set in early 1992.
The upbeat start followed a robust performance in 2025, when the Shanghai Composite Index soared 18.4 percent, its best annual performance since 2020. Throughout last year, AI breakthroughs, policy measures to curb excessive competition and steady earnings growth have bolstered market sentiment, laying a solid foundation for further gains in 2026.
Looking ahead, optimism toward Chinese assets is gaining broad traction among domestic and international institutions, driven largely by confidence in the technology sector.
BULLISH PROSPECTS
A key pillar of optimism lies in the stable economic growth and improvements in corporate earnings. Since late 2025, multiple international organizations, including the World Bank and the International Monetary Fund, have raised their forecasts for China’s 2026 economic growth, citing the country’s long-term growth potential.
Earnings expectations have also improved. CITIC Securities projected listed companies’ net profits to further improve in 2026, with full-year growth of around 4.8 percent.
Valuation levels provide an additional buffer. Despite last year’s strong performance, A-share valuations remain at a significant discount to global peers, reinforcing their appeal to long-term investors.
Solid fundamentals and valuation advantages are expected to draw more global capital into Chinese equities. Huatai Securities estimated that since 2025, global exchange-traded funds investing in Chinese assets have recorded net inflows of about US$83.1 billion, mainly into onshore products.
Foreign financial institutions have echoed this optimism. Goldman Sachs has forecasted further gains for Chinese equities in 2026, projecting the MSCI China Index could rise around 20 percent, as AI investment and policy support are expected to translate into corporate profit growth.
In the Asian emerging markets, J.P. Morgan and Citi Private Bank have continued to hold overweight positions on China. Fidelity International also noted in its 2026 global asset outlook that multiple indicators suggest China may be entering a broader market upswing.
TECH ON TOP
Amid this broadly positive outlook, institutions largely agree that technology – particularly AI – will remain the market’s dominant theme in 2026.
CITIC Securities expected a new wave of systematic gains in the tech sector, with focus areas including semiconductors, computing power and AI applications. It also pointed to upgrades in traditional industries and the global expansion of Chinese companies as additional investment priorities.
UBS Global Wealth Management’s Chief Investment Office, in its “Year Ahead 2026” report, highlighted China’s technology sector as “a top global opportunity,” noting that AI-driven innovation and rising investment are fueling strong growth, with earnings expected to rise significantly in 2026.
It noted that advanced manufacturing and tech self-reliance are emerging as key growth drivers for China’s stock market in 2026, with rising R&D investment in the technology sector helping increase the digital economy’s share of GDP.
Reflecting this momentum, the China Academy of Information and Communications Technology projects that China’s core AI industry will surpass 1.2 trillion yuan in 2025, while the broader digital economy could exceed 70 trillion yuan by 2030.
Yang Delong, chief economist at First Seafront Fund, said the market’s key drivers for 2026 – policy support and ongoing tech innovation in China – remain unchanged. As the market matures, increased off-exchange capital is expected to lift multiple sectors, moving beyond gains concentrated in tech, he added.
– Xinhua
