CICC: The A-share recovery trend is still expected to continue, and the upward fluctuation trend remains unchanged.

CICC released a research report indicating that since July 20, investor confidence in the A-share market has shown signs of repair, with the construction of a unique Chinese capital market and stabilization mechanisms playing a crucial role. From July 20 to the present, the Shanghai Composite Index has risen by 4.7%, the CSI 300 by 3.6%, the growth-oriented ChiNext Index and the STAR 50 by 3.9% and 1.7%, respectively. Meanwhile, the small to mid-cap focused CSI 1000 and CSI 2000 have risen by 7.1% and 7.4%, respectively, and the CSI Dividend Index by 4.3%. Given the current internal and external environment and the ongoing construction of China's capital market, the repair trend since July 20 is expected to continue. In the medium term, the upward trend of the A-share market since September 24 remains unchanged. Compared to the current volatility in the Asia-Pacific markets, China's stabilization mechanism demonstrates superior systematization, timeliness, and strong execution. The normalization of the A-share market's stabilization mechanism has been gradually improved, continuously enhancing the intrinsic stability and resilience of the market. Since September 24, the A-share market has outperformed major global markets. The new "National Nine Articles" was officially released in April 2024. As a guiding document for the medium and long-term development of the capital market, it explicitly proposes to "enhance the intrinsic stability of the capital market" and "promote the stable operation of the market strengthen the reserves of strategic powers and the construction of stabilizing mechanisms." Subsequently, regulators have successively issued over 60 supporting rules regarding IPO review, mergers and acquisitions, market value management, medium and long-term capital entering the market, and public fund reforms. The basic systems and underlying regulatory logic of the capital market have been comprehensively restructured, laying an institutional foundation for stable development. On October 28, 2025, the "14th Five-Year Plan" proposal was released, suggesting to "enhance the inclusivity and adaptability of capital market systems, and improve the functions of a capital market that coordinates investment and financing." On October 31, the China Securities Regulatory Commission released the article "Enhancing the Inclusivity and Adaptability of Capital Market Systems" by Chairman Wu Qing, which outlines the key tasks and measures for improving the inclusivity and adaptability of capital market systems in line with the suggestions of the "14th Five-Year Plan." In addition to emphasizing "greater support for technological innovation, promoting the cultivation of more listed companies that reflect high-quality development requirements, and creating a more attractive institutional environment for 'long-term money and long-term investment,'" the CSRC proposed "to focus on enhancing the scientific and effective regulation of the capital market." Since the release of the new "National Nine Articles" in 2024, capital market development has followed the main line of preventing risks, strengthening regulation, and promoting high-quality development, prioritizing risk prevention and adhering to bottom-line and extreme thinking. In the face of multiple unexpected risk challenges, the CSRC, in coordination with various macro-management, financial management, state-owned assets departments, and market participants, has strengthened policy hedging, capital hedging, and expectation hedging to effectively prevent market fluctuations and systemic risks, further enhancing the intrinsic stability and resilience of the capital market. The construction of our capital market aligns with the improving internal and external environment and the gradually improving fundamentals of listed companies. Since September 24, the A-share market has steadily risen, with the Shanghai Composite Index accumulating a 42% increase (vs. the Hang Seng Index / S&P 500 / Eurozone Stoxx 50's respective cumulative increases of 40% / 35% / 33% during the same period), and the STAR 50 / ChiNext Index gaining 165% / 140% (vs. the NASDAQ Index's increase of 47% in the same timeframe). Our emerging innovative companies are performing well among major markets globally. The toolbox for stabilizing the market has been flexibly utilized since the beginning of the year, promoting steady and far-reaching market progress. On January 15, 2026, the CSRC held its system work conference for the year, where Chairman Wu Qing emphasized the need to "resolutely prevent large fluctuations in the market." Zhongjin, in its report "How to Construct a 'Market Stabilization' Monitoring System?" pointed out that "market stabilization" must prevent both "sharp declines" and "sharp increases." In January, multiple positive factors contributed to a strong start for the A-share market. Following some adjustments to the margin finance system, Zhongjin released a corresponding report titled "Research Series on the 'Market Stabilization' Mechanism (2): Adjustments to the Margin Financing System Strengthening 'Market Stabilization' Effectiveness." On May 13, when both the All A Index and the ChiNext Index reached historical highs, Zhongjin once again stressed the need to "prevent an increase in market volatility." In the second half of this year, external volatility has significantly increased, with the Asia-Pacific markets like South Korea and Japan and overseas technology growth indices experiencing varying degrees of decline. Particularly, the South Korean stock market has recently shown significant fluctuations under the influence of capital and liquidity, and as of August 9, it has yet to recover. In contrast, the A-share market has managed to stabilize ahead since July 20, with the supportive role of policy statements, the entry of medium- and long-term capital from state-owned financial institutions, and the active buybacks and repurchases by listed companies playing vital roles in boosting market sentiment. Specifically: The policy level has responded quickly to stabilize market expectations: In mid-July, the A-share market saw a notable correction, leading to an initial liquidity feedback response, prompting a swift response from regulators. On July 19, the CSRC announced it would hold a symposium for listed companies, securities firms, and fund institutions on July 20 to promote the stable and healthy development of the capital market and stabilize market expectations; the meeting of the Politburo at the end of July explicitly stated "to enhance the resilience and confidence of the capital market," with this wording being more proactive compared to the April meeting's call to "stabilize and enhance market confidence." ETF funds have shown substantial net inflow against the market trend: Since October 2023, state-owned financial institutions, such as Central Huijin, have continuously increased their holdings in broad-based A-share ETFs, explicitly clarifying their quasi-stabilization fund position for the first time under the backdrop of tariff shocks in April last year. On the evening of July 19, China Chengtong and China Guoxin announced increases in their stock asset holdings, stating their commitment to "fully maintain the stable operation of the capital market." In recent ETF developments, during the previous period of significant market volatility, Zhongjin statistics show that the 19 key broad-based ETFs had a cumulative net inflow of over 188 billion yuan in July, with a cumulative net inflow of 149.6 billion yuan during the period from July 13 to July 20, when the market was declining rapidly. Looking at different indices, the key CSI 300 ETF had a net inflow of 51.1 billion yuan, while the key STAR 50 and ChiNext Index ETFs had a net inflow of nearly 50 billion yuan, with net inflows of 27 billion yuan for both CSI 1000 and CSI 2000 ETFs. Financial institutions, especially state-owned enterprises, have been very active. For instance, multiple insurance institutions have expressed increasing their allocation to equity assets and optimizing dividend policies during stock market fluctuations. Several financial institutions have announced buyback actions and subscriptions for their equity products. The concentration of medium and long-term capital entering the market in the short term helps to convey confidence in the capital market, and in the longer term will better utilize the capital market as a "ballast stone." The scale of buybacks and increases in shareholding by listed companies has significantly risen: According to Zhongjin's recent report "The New Buyback Pattern," data shows that since July, many listed companies have actively disclosed buyback plans and accelerated the implementation of existing schemes, reflecting their confidence in corporate growth prospects. In July, a total of 266 buyback plans were announced by A-share listed companies, with a total intended buyback amount of approximately 90 billion yuan, a significant increase compared to the same period last year. As the "repair" process continues, the mid-term A-share market is expected to maintain a "long-term" and "steady" trend. The current A-share market possesses many favorable conditions, with positive factors continuing to accumulate. In a report released on July 20 titled "The Second Buying Opportunity of the Year May Have Arrived," Zhongjin believes that the A-share market currently offers investment attractiveness in both horizontal and vertical comparisons: In 2026, the A-share market is likely to see its best performance in the past five years, with the prosperity of interim reports providing fundamental support, particularly focusing on the upcoming interim report period in August. In a outlook for the second half of the year released in June, Zhongjin estimates a 6.3% year-on-year growth in A-share earnings for 2026, with a projected non-financial sector growth rate of 9.9%, both of which are expected to be the highest growth rates since 2022. Focusing on interim report performance, the market has gradually entered the intensive disclosure period for interim earnings, with 1,921 listed companies having disclosed interim reports or earnings forecasts by August 7, and a positive earnings surprise rate exceeding 40%, continuing good performance year-on-year. Zhongjin expects that the year-on-year growth rate of non-financial earnings for A-shares in the second quarter is likely to further rise compared to the first quarter, potentially maintaining double-digit growth, with strong fundamentals expected to support market performance. The overall valuation of A-shares still offers good cost-effectiveness, with earlier adjustments helping to digest previously high valuations. On the whole, following the recent market correction, the forward price-to-earnings ratios of the A-share index and CSI 300 are 13.4x and 11.6x, respectively, which are relatively low compared to major global markets. In terms of structure, the previously high valuations in certain technology stocks, such as CKH Holdings, have significantly declined, with the forward price-to-earnings ratios of the ChiNext Index, STAR 50, and the CSI Cyclical Index at 23.8x, 69.8x, and 22.4x respectively, each having fallen over 20% from their peaks earlier in the year. Market trading sentiment has notably eased from previous overheating, with the degree of crowding in technology sectors having dropped. At the peak, the TMT sector's share in A-share trading volume surged to a historic high of 52%, but has recently retreated to a low of 42%. The external environment has recently shown marginal improvement. Internationally, recent earnings disclosures from the five major cloud service providers in the U.S. showed strong growth in the second quarter, leading to upward revisions in capital expenditures and validating global AI performance capabilities, resulting in a decrease in global investor concerns about an AI bubble, and the Philadelphia Semiconductor Index shows signs of stabilization. Although the U.S.-Iran conflict still carries uncertainties, there have been recent signs of easing tensions. The mid-term A-share market is expected to continue the "long-term" and "steady" trend. In previous analyses, Zhongjin's report "How to Construct a 'Market Stabilization' Monitoring System?" reviewed the A-share market's upward cycles, suggesting that isolated valuation, capital disruptions, or certain technical signals are likely to only lead to corrections during upward trends. Focusing on the current market situation, Dr. Miao Yanliang pointed out in last year's report "Debating the Causes of Bull Markets" that the resonance between international order restructuring and China's industrial innovation trends is the core driver of the current market rally and the revaluation of Chinese assets. Zhongjin believes that these two conditions remain intact and will continue to support the performance of Chinese assets. In a report released at the beginning of the year, Dr. Miao suggested in "How Does a Slow Bull Market with a Floor and No Ceiling Form? New Order, New Momentum, New Ecology" that the A-share market's resilience and attractiveness are continuously strengthening, providing better conditions for forming a "slow bull market with a floor and no ceiling." The steady behavior of the A-share market since September 24 is expected to continue. The long-term and steady market relies more on improvements in fundamentals to drive index movement rather than purely valuation expansion, which will further attract incremental investments, particularly medium- and long-term funds, creating a virtuous cycle conducive to the mid-to-long-term healthy development of the A-share market. In terms of allocation, the pursuit of new opportunities continues, with convergence in temperature differences. Certain characteristics of the A-share market prior align with those observed during the tariff actions in early April last year, with market volatility and investors' risk appetite experiencing a phased retreat behind the previously dominant dividend style. As market risk appetites progressively recover, Zhongjin recommends focusing on performance certainty during the unfolding of the market. Profit realization ability may become the core variable. There are two main lines of focus: 1) Prosperity growth requires careful selection: After sharp adjustments in technology styles, crowding has noticeably eased. Industries with sufficiently high prosperity can achieve high growth on the numerator side to counterbalance the denominator drag, such as segments related to AI infrastructure, like optical communication and PCB, where the high prosperity state remains strong this year. Companies in semiconductors and computational power still require close attention to the alignment of fundamentals and valuations; the technology growth market may exhibit a differentiation trend going forward. Many innovative pharmaceutical companies are entering the stage of clinical data validation, warranting top-down attention. 2) Cycle improvement: Increasingly more sectors are seeing fundamentals rising from the cycle bottom. Zhongjin advises a comprehensive consideration of geopolitical situations and production capacity cycle positions, focusing on sectors with improving performance and supply-demand patterns, such as electric grid equipment, petrochemicals, engineering machinery, and non-bank financial sectors benefiting from the favorable capital market; precious metals sectors, having gone through several adjustments, are also worth monitoring. The fundamental recovery progress of purely domestic demand industries remains relatively slow and requires further observation. Chart 1: The A-share market has outperformed major global markets since September 24, especially in emerging innovative styles. Note: Data as of August 7, 2026 Source: Wind, CICC Research Department Chart 2: During the rapid decline of the market in mid-July, key broad-based ETFs showed a significant increase in net inflows, with the CSI 300, STAR 50, and ChiNext Index being the main focus for inflows. Note: Data as of August 7, 2026 Source: Wind, CICC Research Department Chart 3: Major indices' forward price-to-earnings ratios have further declined, and previously high valuations have noticeably eased. Note: Data as of August 7, 2026 Source: Chaoyang Yongxu, CICC Research Department Chart 4: The A-share market's valuation levels are relatively low compared to major global markets. Note: Data as of August 7, 2026 Source: Wind, CICC Research Department Chart 5: The overheating in market trading sentiment has significantly eased, with the rolling turnover rate calculated based on free-float market capitalization declining. Note: Data as of August 7, 2026 Source: Wind, CICC Research Department Chart 6: Statistics of high-point monitoring signals scoring table. Source: Wind, CICC Research Department