Daiwa has released a research report providing a forward-looking assessment of Chinese stocks' 2025 performance, anticipating a structural recovery but with limited positive surprises.

The brokerage expects the A-share market to have temporarily reversed the trend of earnings deterioration seen from 2022 to 2024 by 2025.

As of January 30, 2026, among the more than 2,500 companies that had issued performance forecasts, 40.3% recorded profit improvement (transitioning from loss to profit, profit growth, or sustained profitability), a figure higher than the 33.5% in 2024 but lower than the 43.8% in the first half of 2025.

However, the majority of companies still reported negative performance (sustained losses, profit decline, or a shift from profit to loss).

Compared to market consensus expectations, Daiwa anticipates that among 536 A-share companies with available data, 23% will deliver "earnings beats" (up from 16% in 2024), while 54% will report "earnings misses" (down from 57% in 2024).

Although fundamentals have gradually improved over the past year, analysts' expectations for the pace of the recovery were evidently too optimistic.

Benefiting from global metal market trends and strength in Chinese equities, the steel, non-ferrous metals, and diversified financial sectors are projected to lead in 2025, with over 70% of their constituent stocks showing profit improvement.

Despite the ongoing property sector downturn, the proportion of property developers and building materials stocks showing profit improvement has risen from around 20% to 35% and 53.7%, respectively.

Low base effects and policy measures aimed at curbing internal competition are identified as the primary drivers.

Daiwa indicated that since the start of 2026, profit momentum for Chinese stocks has continued, with the non-ferrous metals, transportation, and electronics sectors seeing the strongest earnings upgrades, while downstream industries have faced downgrades.