What potential upward opportunities could the 15th Five-Year Plan bring to A-shares?

``` J.P. Morgan believes that the "15th Five-Year Plan" will bring two core upward opportunities to the A-share market: a cyclical recovery driven by anti-involution and structural growth opportunities brought by consumption upgrading in services. On September 18, according to Wind Chasing Trading Desk, J.P. Morgan stated in its latest research report that the upcoming "15th Five-Year Plan" to be discussed at the Fourth Plenary Session in October will bring two core upward opportunities to the A-share market: the anti-involution theme and service consumption upgrading. The research report points out that anti-involution measures are expected to become the main focus of the "15th Five-Year Plan", helping more industries to achieve cyclical improvement through capacity reduction and price rebound. J.P. Morgan expects that this 18-24 month thematic rally will return prices and investment returns to normal levels, greatly boosting household wealth via stock appreciation. J.P. Morgan notes that service consumption will benefit from the Chinese government's goal to raise household income during this new five-year plan. According to analysis, there is still significant room for growth in China's service consumption ratio, with investment opportunities in healthcare, financial services, and cultural and educational entertainment sectors. J.P. Morgan remains moderately optimistic about the A-share market in the medium term, believing that the shift in household asset allocation into stocks will support a rise in the next 12 months' P/E ratio for the CSI 300 Index. Anti-involution: 18-24 Months of Structural Opportunities J.P. Morgan emphasizes that anti-involution will be a main focus of the "15th Five-Year Plan," a theme expected to bring 18-24 months of market opportunities, aiming to return industry prices and investment returns to normal. Since market-oriented reforms in the late 1970s, China's "local government corporatization" mechanism has enabled the emergence of severe excess capacity and low investment returns. Looking ahead to the "15th Five-Year Plan" period (2026-2030), this mechanism may be constrained by stricter restrictions and fiscal discipline, triggering M&As and integration, entering a "decade of integration." J.P. Morgan has screened by market capitalization for major stocks involved in anti-involution measures, covering 12 industries including automobiles, batteries, lithium, photovoltaics, cement, chemicals, coal, steel, dairy, live pigs, liquor, and logistics. Among these, leading companies such as BYD, CATL, and Kweichow Moutai are in focus. Service Consumption: Vast Growth Potential to be Tapped J.P. Morgan believes that compared with developed markets, there is still substantial room for growth in China's service consumption. The research report states that China's current per capita income (US$5,660 at the end of 2024) and service consumption ratio (about 46%) are similar to the U.S. levels in 1973 (US$5,662/49%). With a compound annual growth rate target of about 5% toward 2035, China's per capita income will reach US$7,655 in five years, equivalent to U.S. levels in 1976-1977, with the service consumption ratio expected to increase to 51%. In specific sectors, Chinese residents' spending ratios in healthcare (9% vs. U.S. 17%), finance (very low vs. U.S. 8%), and education/cultural entertainment (10% vs. U.S. 13%) are all significantly lower than the U.S., leaving ample room for improvement. J.P. Morgan selects 14 non-financial stocks as service consumption growth investment targets, including medical service stocks such as Aier Eye Hospital and Tongce Medical, education stocks such as Offcn Education, and entertainment stocks such as Light Media and 37 Interactive Entertainment. All these stocks have a free float market cap above $1 billion and a 3-month average daily turnover exceeding $20 million. The bank especially emphasizes that since 2025, Chinese government policy support for the services consumption industry has significantly strengthened. Policy actions range from the "Silver Tourism Train" plan in January to service industry operating entity interest subsidy loans in August, covering many sectors including tourism, health, elderly care, childcare, housekeeping, and cultural entertainment. Market Outlook: Medium-Term Optimism, Short-Term Volatility J.P. Morgan maintains a medium-term optimistic view on A-shares. Research shows that ongoing household asset allocation shift to stocks can sustain the rebound. However, as the CSI 300 Index’s next 12 months' P/E ratio based on consensus EPS estimates has reached 14.4x, 1.7 standard deviations above its median since 2016, the market may undergo short-term consolidation. For the first half of 2025, the year-on-year EPS growth rate for the CSI 300 is 5.9%. Based on J.P. Morgan's weighted consensus forecast for individual stocks, the full-year 2025 EPS year-on-year growth rate is 14.1%, leaving substantial upside potential in the second half. Looking to 2026, the effective implementation of anti-involution measures and appropriate fiscal support could help maintain market expectations for next-12-months EPS and year-on-year growth, providing sustained momentum for the A-share market. ~~~~~~~~~~~~~~~~~~~~~~~~ The above content is from Wind Chasing Trading Desk. For more detailed interpretation, including real-time analysis and frontline research, please join [Wind Chasing Trading Desk—Annual Membership]. Risk Warning and Disclaimer The market has risks, investment needs caution. This article does not constitute personal investment advice nor does it consider the particular investment objectives, financial situation, or needs of any individual user. 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