Low tech valuations + continued implementation of "anti-involution" measures, foreign investment banks remain bullish on the Chinese stock market!

Against a backdrop of global market uncertainty, several top foreign financial institutions, including UBS, JPMorgan, and Morgan Stanley, have unanimously cast a vote of confidence in China’s stock market for 2026.

According to Chase the Wind Trading Desk, JPMorgan holds a constructive outlook on the China A-share market in 2026, predicting that the combination of “anti-involution” policies, AI development, improvements in the global macro environment, and differentiated recovery in consumption will jointly drive a structural market upswing. Under its base case scenario, the firm set the target for the CSI 300 Index at 5,200 points by the end of 2026, noting that in a bull market scenario, the index could reach 6,010 points.

UBS forecasts that, under the dual drivers of accelerated earnings and valuation recovery, the A-share market could “reach new heights” in 2026 and expects overall earnings growth to rise from 6% in 2025 to 8% in 2026. They emphasize that the current equity risk premium of A-shares is much higher than the historical average, making it notably attractive compared to other markets. UBS believes Chinese internet platforms have a first-mover advantage in AI monetization and are extremely undervalued, providing a rare window for investors to position themselves.

Morgan Stanley stated that 2026 will be a “year of stability” following high returns in 2025, with limited index upside, moderate corporate earnings growth, and valuations returning to historically higher normal levels. As China regains its footing in global technology competition and trade tensions ease, market conditions will become more stable.

JPMorgan Outlook for 2026 A-shares: CSI 300 Targeted at 5,200 Points, Focus on Four Major Investment Themes

In JPMorgan’s outlook report released on November 26, analysts believe the 5,200-point target implies about 17% upside, with the valuation based on the Wind consensus estimate of a 15.9x price/earnings ratio. The report also provides targets of 6,000 points in a bull scenario and 4,000 points in a bear scenario.

The report details four core drivers for its bullish view on the 2026 A-share market:

Implementation of “anti-involution” policies: The report expects these policies to accelerate next year. This will improve industry competition by shifting from competition based on price and scale to quality, structurally enhancing the net profit margin and return on equity (ROE) of CSI 300 constituents. Currently, the profit margin expectations for Chinese companies in 2026 are only mid-range among Asia-Pacific markets, leaving room for upside.AI infrastructure & monetization: Growth in global AI infrastructure capex will directly benefit Chinese suppliers. The report notes that as domestic production and AI commercialization progress, more related stocks stand to gain.Improving global macro environment: In 2026, fiscal and monetary policies in developed markets are expected to turn more accommodative, strongly supporting overseas sales of Chinese listed companies—particularly those with high export ratios.K-shaped recovery in consumption: The consumer market will show a differentiated recovery, with both low-end and luxury consumption likely to benefit, bringing investment opportunities to relevant sectors.

UBS: Dual Recovery in Profits and Valuations, A-shares Remain Attractive

UBS believes that China’s tech companies have not only relative valuation advantages but also unique monetization potential in the global AI wave.

In its November 26 report, UBS states that Chinese internet platforms will monetize AI earlier than their counterparts in other countries, and their valuations are “exceptionally cheap.” In its global strategy, UBS sees productivity boosts driven by generative AI as the core driver of a “rational” global stock market bubble, and China, as one of the leading regions in AI adoption, stands to benefit fully. UBS lists “technological self-reliance” as the main investment theme, highlighting that domestic substitution in key areas such as semiconductors and industrial robotics is accelerating due to geopolitical factors.

On the valuation side, UBS highlights the relative attractiveness of A-shares. The current A-share equity risk premium (ERP) is significantly above its historical average, while the ERP for the U.S. and other major emerging markets has fallen below long-term averages. This suggests that the risk compensation for investing in A-shares is relatively substantial.

New Trends in Fund Flows: Shift in Household Savings and Entry of Long-term Capital

Positive changes in the funding environment are another key pillar supporting foreign institutions’ optimistic outlook. UBS noted in its report that China’s market “reservoir” of funds is undergoing structural changes.

As the property market enters an adjustment period and bank deposit rates continue to decline, household wealth is searching for new allocations, with A-shares increasingly becoming a major destination for this capital. Data from UBS shows that although the ratio of total household deposits to total A-share market capitalization declined in the second half of 2025, it remains above historical averages, indicating tremendous potential for household savings to enter the stock market.

Meanwhile, the pace of long-term capital entering the market is accelerating. According to the report, by the end of Q3 2025, the scale of stocks and funds held by insurance capital had increased by 1.5 trillion yuan compared to the end of 2024. In addition, substantive progress has been made in reforms aimed at improving the quality and investment value of listed companies through market capitalization management. The total cash dividends paid by A-share companies in 2025 are expected to break the 2 trillion yuan mark for the first time, and the scale of stock buybacks has also risen significantly. These measures are effectively enhancing the appeal of A-shares to long-term investors.

~~~~~~~~~~~~~~~~~~~~~~~~

The above featured content is from Chase the Wind Trading Desk.

For more detailed insights, including real-time commentary and frontline research, please join [Chase the Wind Trading Desk·Annual Membership]

Risk Warning and DisclaimerThe market carries risks; investment needs caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinion, view, or conclusion in this article is suitable for their particular circumstances. Invest accordingly at your own risk.