Momentum builds in A-share market

The signs of a bull run are slowly but steadily emerging in China's A-share market, underpinned by ongoing structural reforms and sustained long-term capital inflows. Experts said the developing rally is expected to gain further traction on the back of policy support and a gradually improving external environment.

Their remarks came on Wednesday as the benchmark Shanghai Composite Index rose for an eighth straight session, climbing 0.48 percent to close at 3,683.46 — its highest level since December 2021.

The Shenzhen Component Index gained 1.76 percent, while the tech-heavy ChiNext surged 3.62 percent. The total turnover on the Shanghai and Shenzhen stock exchanges topped 2.1 trillion yuan ($292.69 billion) — a 13.5 percent increase from the previous day.

Investor enthusiasm is surging on both the institutional and retail fronts. July witnessed a record monthly number of new mutual fund launches, reflecting rising interest among households in equity assets as returns from traditional savings and wealth management products continue to decline. Total assets under management in public mutual funds have now exceeded 34 trillion yuan.

Insurance companies are also ramping up their presence in the A-share market. The number of public disclosures triggered by insurers' equity holdings surpassing the 5 percent threshold has already exceeded last year's total. Analysts said insurers are increasingly focusing on companies from the emerging industries and advanced manufacturing sectors, supporting China's shift toward high-quality development.

Yang Delong, chief economist at First Seafront Fund, said that insurance companies have played an increasingly stabilizing role in the A-share market by boosting their equity allocations. He noted that insurers have recently focused more of their research on companies engaged in new quality productive forces, a move that supports China's broader push to upgrade its real economy and enhance long-term investment value.

Retail investor participation is also rising. Nearly 14.6 million individual trading accounts were opened in the first seven months of 2025, a 37 percent year-on-year increase, according to data provider Wind Info.

Furthermore, foreign investors have been steadily increasing their exposure to Chinese equities, including A-shares and Hong Kong-listed stocks. Net foreign inflows totaled $2.7 billion in July, more than double the level in June, according to a recent report by Morgan Stanley.

Analysts said the macro environment is becoming increasingly favorable for Chinese equities. Expectations of a weaker US dollar and potential interest rate cuts by the Federal Reserve are improving the outlook for emerging markets. The narrowing interest rate differential between China and the United States could further accelerate foreign capital inflows.

Hong Hao, chief investment officer at Lotus Asset Management, said the upward momentum of Chinese stocks will sustain for a long time if the US dollar's weakness proves to be a multiyear trend. Also, the Chinese market has been increasingly resilient in the face of negative tariff headlines.

Given the current favorable liquidity conditions in the Chinese market and the fear-of-missing-out sentiment, any corrections in the A-share market are likely to be quickly absorbed by buyers, he added.

Zhu Liang, chief investment officer at AllianceBernstein China, said that despite strong gains in recent weeks — with the Shanghai Composite Index up nearly 7 percent and the Shenzhen Component Index up more than 10 percent since July — valuations in the A-share market remain attractive.

Sounding a word of caution, some experts said that risk appetite in the A-share market may be suppressed by factors such as changes in tariff talks between China and the US, as well as domestic challenges facing the Chinese economy.

He Kang, chief strategy analyst at Huatai Securities, said that there are still challenges regarding China's economic recovery, as efforts by policymakers to create a fairer competition environment may take time to show effect, and this may affect the profitability outlook of A-share companies.

shijing@chinadaily.com.cn