From "doubt" to "recognizing unique value", Wall Street looks positively on the Chinese stock market continuing to rise next year.

The Chinese stock market is regaining global favor with its strength in the field of artificial intelligence and its resilience in the face of geopolitical tensions. Wall Street is generally betting that this upward trend will continue in 2026. Major global fund management companies such as Amundi SA, BNP Paribas Asset Management, Fidelity International, and Man Group all expect the Chinese stock market to continue to rise. JPMorgan Chase & Co. recently upgraded its rating on the Chinese market to "overweight", while Allspring Global Investments pointed out that this asset class is becoming "indispensable" for foreign investors. This optimism has led to a fundamental shift in investor sentiment, with the market moving from initial skepticism to recognition that the Chinese market can provide unique value through technological progress. According to Bloomberg data, the MSCI China Index has surged by about 30% this year, outperforming the S&P 500 Index by the largest margin since 2017 and adding $2.4 trillion in market value. Although current inflows of funds are primarily driven by passive funds, the market generally expects that as corporate earnings improve and inflation turns around, the return of active fund managers is likely to lead the next phase of rebound and further consolidate the market's upward trend. Reversal of sentiment and attractive valuations Investor perceptions of the Chinese market have significantly changed. "China has turned a corner, proving its resilience, and investors are increasingly embracing an 'investable' China that offers diversity and innovation," said George Efstathopoulos, portfolio manager at Fidelity International in Singapore, who now prefers to buy Chinese stocks on dips. Gary Tan of Allspring Global Investments also believes that Chinese assets are becoming indispensable. In addition to improved sentiment, the valuation advantage is also a key factor attracting funds. Despite the sharp rise, Chinese stocks are still relatively cheap compared to global peers. The MSCI China Index currently has a forward P/E ratio of 12, while the MSCI Asia Index is at 15 and the S&P 500 Index is as high as 22 times. However, institutions also warn that next year's returns may not be sustained at the same pace. Nomura Holdings Inc. baseline scenario predicts a rise of about 9% for the MSCI China Index from current levels, while Morgan Stanley expects a rise of around 6%. According to Morgan Stanley data, as of November this year, foreign long-only funds have bought about $10 billion worth of stocks in the mainland China and Hong Kong stock markets, reversing the outflow of $17 billion in 2024. Winnie Wu, head of stock strategy at Bank of America in Asia-Pacific, said that given the strong performance of the US market, the threshold for investing in China remains high. However, she emphasized that the improvement in corporate earnings could change this situation, and that the next stage of the Chinese stock market rebound will be driven by global funds. Technology-driven opportunities and re-inflation opportunities The core logic behind optimism about the Chinese stock market lies in the optimistic expectations for its large group of technology giants, especially in the fields of chips, biopharmaceuticals, and Siasun Robot & Automation. The AI frenzy has driven sharp increases in the stock prices of companies like Alibaba and Cambricon. At the same time, sectors that have underperformed the market this year, especially the consumer sector, are also seen as having rebound potential. Andrew Swan, head of Asian stocks at Man Group, said the opportunity lies in stocks that are influenced by economic stabilization rather than purely re-inflation: "If re-inflation is the next stage of the Chinese economy, then there will be plenty of opportunities within it." Some believe that foreign investors are not a necessary condition for the rise of the Chinese stock market. Local mutual funds are buying, and under earlier regulatory push this year, demand from insurance companies is also rising. The market's biggest hope comes from China's huge household savings, with Chinese families holding around $23 trillion in deposits seeking ways to invest. Many investors believe that this massive amount of funds will help to boost the market. Florian Neto, head of Asia investments at Amundi SA, said: "If we confirm that domestic investors are returning to their local market, the stock market will continue to soar."