Analysts see A-shares in consolidation despite Friday's decline

Despite a dip in China's A-shares on Friday, analysts believe the market remains in a consolidation phase as it prepares for 2026. They expect the Shanghai Composite Index to remain broadly stable around the 4,000-point level, with ongoing market style rotation.

By Friday's close, the Shanghai Composite Index finished at 3,834.89, down 2.45 percent, while the Shenzhen Component Index closed at 12,538.07, down 3.41 percent. The ChiNext Index, which tracks China's Nasdaq-style growth enterprises, closed at 2,920.08, down 4.02 percent.

Despite corrections in individual stocks, several sectors still displayed notable activity, including AI and digital-related sectors, online gaming, banking, and industries related to the Hainan Free Trade Port.

Analysts at the China International Capital Corporation believe the upward, though volatile, trend in A-shares that began on Sept 24, 2024, will likely continue. However, following valuation recovery, fundamentals will become increasingly important. CICC forecasts that full-market earnings growth could reach 4.7 percent in 2026, with more industries experiencing both high prosperity and turning points in performance.

In its 2026 outlook, CITIC Securities said that China's A-share market is heading toward a "low-volatility slow bull market", with "global exposure" becoming a core factor in market assessments. According to the report, companies with high overseas exposure contributed 39 percent of profits and 35 percent of market capitalization within the non-financial A-share universe — enough to influence overall market trends. Over the 15th Five-Year Plan period (2026-30), Chinese enterprises are expected to gain greater pricing power within global value chains, laying the foundation for this slow bull market.

Zhang Gang, an analyst at Central China Securities, noted that the average price-to-earnings ratios for the Shanghai Composite Index and ChiNext Index currently stand at 16.14 and 47.93 times, respectively — above their median levels over the past three years — making the current period favorable for medium- to long-term positioning.

October financial data shows that households are continuing to shift their assets toward financial products, providing incremental capital to the market. In the short term, the market is expected to remain in a stable but fluctuating pattern, said Zhang.

Another Central China Securities analyst, Xu Zhi, said in a report that looking ahead to 2026, as valuation reversion gains momentum, the value-oriented style in the A-share market is expected to gradually strengthen. Meanwhile, risk-averse capital, particularly from insurance and bond funds, is gradually shifting toward "fixed income plus" and multi-asset strategies. High-dividend assets and undervalued value stocks are expected to attract key incremental capital.

jiangxueqing@chinadaily.com.cn