Corporate operational standards continue to improve, combined with targeted policy easing, which may drive a structural rise in Chinese stocks, particularly in the technology and financial sectors. As China enters the Lunar New Year holiday, investors are expressing sustained optimism toward Chinese equities, especially in areas such as technology and real estate. The Year of the Horse, symbolizing progress and effort, coincides with a market backdrop where A-shares have already achieved strong gains over the past 12 months. Thanks to resilient export performance, advancements in artificial intelligence, and targeted policy easing measures, Chinese equities delivered solid returns in 2025. Despite ongoing pressures in the real estate sector and persistent external trade tensions, economic growth met official targets. Investors believe that while the initial phase of the rally was driven by valuation recovery from low levels, the current market uptrend is increasingly supported by sustainable structural improvements.

Technology stocks remain a focal point. Innovations in domestic AI models and continued investment in data centers have strengthened confidence in China’s push for technological self-reliance. At the same time, corporate behavior is shifting: companies are placing greater emphasis on capital control, governance standards, and shareholder returns, with significant increases in dividend payouts and share buybacks in recent years. This shift is seen as enhancing the quality and durability of equity returns. Although stock valuations are no longer deeply undervalued, they are still considered discounted compared to other global equity markets. Investors expect corporate earnings growth to play a more prominent role in stock performance in 2026, following last year’s valuation-driven rebound.

Financials, internet platforms, and select consumer stocks are among the preferred allocation areas. Policy support is another key theme. Authorities have introduced measures aimed at stabilizing the real estate market and lowering financing costs. Additionally, signals have been sent indicating renewed efforts to boost domestic consumption, including possible relaxations of previous restrictions on certain industries. Given the increasing weight of the technology sector, a slowdown in AI-related investments could also affect economic growth. Nevertheless, many investors believe that as long as corporate earnings gradually align with current valuations, structural reforms, policy support, and innovation-driven growth could enable further gains in Chinese equities.