Guotai Haitong: A-shares market will not stop here. in the future, stock indexes will reach new highs.

The strategy report released by Guotai Haitong Securities shows that as the Shanghai Composite Index breaks through the 3800-point mark to reach a ten-year high, market divergence and doubts have also increased. Guotai Haitong's strategy believes that the Chinese stock market will not stop there, and the stock index will reach new highs. Since 2025, our logic for being bullish on China has been consistent: first, the acceleration of China's transformation progress and the decrease in uncertainty in economic and social development. Second, the sinking of risk-free interest rates, the historic turning point of long-term capital and residents entering the market, aligning with the trend of the times. Third, with capital market reform, various sectors of society have systematically changed their views on the value of Chinese assets and risk awareness, opening up space for the development of the capital market. The market does not need to overly worry about a temporary adjustment: 1) the margin trading scale/circulation market value is at historical averages, the overall valuation levels of both markets are not high, with most heavyweight stocks trading at low levels, indicating that the market as a whole is not overheated; 2) the probability of the Federal Reserve cutting interest rates in September has increased, which may provide an opportunity for the People's Bank of China to relax and restart the government bond trading; incremental economic support measures are expected to be introduced. Therefore, the momentum of the Chinese stock market's rise is healthy, sustainable, and we continue to see positive performance in Chinese A/H shares. In terms of allocation, it is recommended to increase the proportion of medium-cap stocks or low-priced blue-chip stocks in September.