Executive Summary:
– Gold and A-shares delivered exceptional returns in 2025, fueled by monetary policy shifts, technological breakthroughs, and sustained asset reallocation from bank deposits.
– The bull market is expected to persist into 2026, but the investment thesis is transitioning from broad valuation repair and speculation to a focus on earnings validation and specific thematic opportunities.
– A massive wave of maturing time deposits, estimated at approximately 57 trillion yuan, is set to amplify the ongoing reallocation of household savings into capital markets, providing crucial liquidity.
– Investment strategies must adapt to new dominant themes, including the application phase of AI, external demand driven by global trends, and selective cyclical reversals in domestic sectors.
– Key macroeconomic factors supporting the market include a continued weak U.S. dollar, anticipated Federal Reserve easing, and a steady appreciation trajectory for the Chinese yuan (人民币).
A Nation Rethinks Savings: The Hook for a New Market Cycle
The financial calculus for millions of Chinese savers has fundamentally changed. “Three years ago, the rate on a 3-year time deposit was 3.1%, but now it’s only 1.7%,” notes Ms. Zhang (张女士), who is now channeling maturing savings into wealth management products. Her story is emblematic of a profound shift: the great Chinese asset reallocation is in full swing, providing the fuel for a market that continues to advance, even as its driving logic has changed. In 2025, conversations about investment returns—like a social media user boasting of a 40% annual gain—moved from niche forums to mainstream discourse, underpinned by dramatic performances in gold and equities. As we enter 2026, the central question for global investors is not if the bull market remains, but how to navigate its evolved contours. The bull market logic has changed, demanding a more nuanced, fundamentals-driven approach to capital allocation in Chinese assets.
2025 in Review: The Dual Engines of Gold and A-Shares
The past year served as a powerful testament to shifting capital flows and transformative themes. The global macroeconomic landscape, characterized by slowing growth and geopolitical friction, created a backdrop where specific asset classes thrived under new conditions.
The Unstoppable Rise of Precious Metals
Gold was the undisputed star of 2025, closing above $4,300 per ounce and recording a staggering 65% annual gain. This rally was not a speculative blip but a sustained move supported by central bank buying, investor diversification away from fiat currencies, and its safe-haven appeal. The surge translated directly into market products; the total assets under management for domestic gold ETFs (交易所交易基金) doubled, reaching approximately 242.8 billion yuan by year-end, with fund shares soaring 108% year-on-year. Silver, with its dual industrial and monetary attributes, outperformed even gold, skyrocketing 129.83% on the COMEX, driven by insatiable demand from the solar photovoltaic and electric vehicle sectors. The broader commodity complex also shone, with copper rising 42.52% and aluminum up 17.46%, while crude oil languished with a negative return.
The A-Share Awakening and Tech-Led Rally
Simultaneously, the A-share market embarked on its own revaluation journey. The year began with a spark from the launch of DeepSeek (深度求索), igniting a technology sector frenzy that propelled the Shanghai Composite Index (上证指数) above 3,400 points. After a mid-year dip triggered by global trade tensions and stabilized by supportive actions from institutions like Central Huijin Investment Ltd. (中央汇金公司), the market resumed its upward climb, decisively entering bull market territory and breaching the 4,000-point level by October. The narrative was unequivocally centered on technology—artificial intelligence, humanoid robots, semiconductors, and commercial aerospace—while the materials sector, particularly companies linked to copper and aluminum, rode the wave of rising industrial metal prices. This period was largely driven by imagination and multiple expansion, but as 2026 dawns, the market is signaling a demand for tangible results.
Navigating Opening Volatility: Signals for 2026
The initial weeks of 2026 provided a stark reminder that continuity does not imply absence of volatility. A sharp, transient correction in gold prices followed the nomination of a new Federal Reserve Chair, while A-shares saw regulatory intervention to cool excessive margin speculation.
The Gold Outlook: Sustained Demand Meets Macro Winds
The question on every gold investor’s mind is whether the bull run can endure. Analysis from institutions like China Galaxy Securities (银河证券) suggests the environment remains supportive. With the Federal Reserve expected to maintain a loose monetary policy cycle, further rate cuts and an end to balance sheet reduction should pressure U.S. Treasury yields and the U.S. dollar index lower. A weaker dollar reduces the acquisition cost for holders of other currencies, enhancing the attractiveness of dollar-denominated commodities like gold and silver. Gregory C. Shearer, Global Head of Base and Precious Metals Strategy at JPMorgan Chase, projects central bank and investor diversification demand could push gold to $6,300 per ounce by end-2026 and toward $6,600 in 2027. The bull market logic has changed here too, with emphasis shifting from pure safe-haven flows to a structural reassessment of gold’s role in a diversified portfolio amidst fiscal concerns.
Currency Dynamics and Global Liquidity Shifts
Complementing the commodity story is a pivotal currency forecast. Multiple analysts believe the Chinese yuan is poised for a period of steady appreciation. Zhao Wei (赵伟), Chief Economist at Shenwan Hongyuan (申万宏源), stated that the yuan entered an appreciation channel in 2025 and that a clearer expectation for sustained strength could form over the coming years, gradually reshaping the asset allocation behavior of international capital. Concurrently, a structurally weaker U.S. dollar is anticipated by firms like China Merchants Securities (招商证券), citing high and persistent U.S. fiscal deficits that may ultimately undermine dollar credibility. This combination—a stronger yuan and a weaker dollar—opens the door for significant liquidity reallocation into emerging market equities, with Chinese assets standing as a prime beneficiary.
Bull Market Not Over, But the Logic Has Changed
This is the core thesis for 2026. The market’s engine is transitioning from liquidity-driven multiple expansion to earnings-driven growth validation. While the directional trend remains upward, the sources of alpha are evolving.
From Imagination to Earnings: The New Equity Mandate
Fund managers universally point to corporate profit recovery as the central variable for 2026. Tang Xiaodong (唐小东), Co-Head of the Macro Strategy Department at Southern Fund (南方基金), notes that while the domestic economy will likely remain stable, market expectations, geopolitical developments, and the pace of technological industrialization will become more critical drivers than broad macroeconomic swings. The consensus is that technology remains the core theme, but the investment focus must mature. The initial phase of conceptual hype is giving way to a search for tangible applications and profitable business models. This represents a fundamental shift in the bull market logic.
Institutional Blueprints for the New Phase
Leading institutions have outlined refreshed roadmaps that reflect this changed logic. Li Qiusuo (李求索), Chief Domestic Strategy Analyst at China International Capital Corporation Limited (中金公司), identifies three primary investment lines: 1) **Prosperous Growth**: Focusing on the AI sector’s transition to the application phase, with opportunities in computing power, optical modules, and cloud infrastructure, particularly favoring domestic suppliers. Application layers like robotics, consumer electronics, and autonomous driving are also key. 2) **External Demand Breakout**: Leveraging China’s manufacturing prowess in global markets, targeting home appliances, engineering machinery, commercial vehicles, and globally priced resources like industrial metals. 3) **Cyclical Reversal**: Identifying sectors nearing an inflection point due to improving supply-demand dynamics or policy support, such as chemicals, aquaculture, and segments of the new energy industry. Fang Han (方晗), Director of Equity Strategy Research at Harvest Fund (嘉实基金), emphasizes a two-pronged approach: participating in the diffusion of the “AI+” theme into upstream materials and infrastructure, and selectively investing in undervalued domestic demand sectors poised for a profit rebound.
The Great Reallocation: Deposits as a Source of Sustained Fuel
Beneath the market narratives lies a powerful structural trend: the systematic movement of household wealth out of low-yield bank deposits and into higher-returning assets. This is not a fleeting phenomenon but a long-term rebalancing act with direct implications for market liquidity.
The Scale of Maturing Deposits
Based on data from the six largest state-owned banks’ 2025 interim reports, Guosen Securities (国信证券) estimates that approximately 57 trillion yuan in time deposits are set to mature in 2026, with a significant portion concentrated in the first half. This vast pool represents potential ammunition for financial markets. As deposit rates have trended lower, the correlation with the proportion of household funds flowing into non-bank deposits (like wealth management products) has turned negative, indicating that the “deposit migration” trend has strong momentum.
Channeling Liquidity into Markets
However, the path this capital takes is changing. Individual investors are demonstrating increased sophistication, often opting for indirect market exposure through bank wealth management products or passive funds rather than direct stock trading. Therefore, the liquidity boost for A-shares may come increasingly through institutional channels, as these products incrementally raise their equity allocation to enhance returns. This intermediation can lead to more stable, longer-term capital supporting the market. Coupled with continued inflows from long-term domestic institutional investors (encouraged by regulatory guidance) and the prospective return of foreign capital attracted by a strengthening yuan, the liquidity backdrop for Chinese equities in 2026 appears constructive. This sustained inflow is a key reason why the bull market logic has changed from being purely policy-supported to being fundamentally underpinned by a structural shift in national savings behavior.
Strategic Imperatives for the Year Ahead
For global institutional investors and fund managers, navigating this environment requires a calibrated strategy that acknowledges both continuity and change.
Equity Market Positioning: Balance and Selectivity
The era of broad-based, easy gains is likely over. Success in 2026 will hinge on stock-picking based on genuine earnings prospects and thematic righteousness. Investors should:
– Prioritize companies within the tech ecosystem that are demonstrating clear paths to monetization and competitive moats.
– Scrutinize the “external demand” theme, focusing on firms with proven global competitiveness and resilient supply chains.
– Actively monitor early signs of profit recovery in beaten-down cyclical and consumer discretionary sectors, which could offer significant upside as the domestic consumption narrative improves.
The Enduring Case for Gold and Commodities
Despite near-term volatility, the strategic allocation to precious metals and select industrial commodities remains warranted. The macro setup of easing monetary policy, geopolitical uncertainty, and green transition demand for metals like copper and silver creates a favorable medium-term outlook. Investors should consider:
– Using price pullbacks in gold to build or add to strategic positions, viewing it as a portfolio diversifier rather than a tactical trade.
– Differentiating between commodities; while gold’s monetary属性 (attribute) is primary, copper’s story is tied to global industrial growth and electrification, requiring different monitoring metrics.
Historical analysis from CICC suggests that the current bull market phases for A-shares, Hong Kong stocks, and gold, when measured against median historical cycle lengths, do not indicate an imminent peak. The more critical factor is the domestic economic context: with growth in a steady recovery phase and inflation subdued, there is little compelling reason for policymakers to tighten financial conditions aggressively. This provides a supportive floor for asset prices. The bull market logic has changed, but the direction of travel remains positive for those who adapt.
Synthesizing the Path Forward in a Rebased Bull Market
The evidence points to a continuation of the bull market in Chinese assets, but one operating under a new set of rules. The frenetic, concept-driven rallies of 2025 are maturing into a more discerning phase where fundamentals, earnings visibility, and thematic execution will separate winners from losers. The massive reservoir of household savings continues to seek yield, ensuring a tailwind of liquidity, albeit one that is increasingly channeled through professional intermediaries. For the sophisticated investor, the task is clear: move beyond the simple question of “is the bull market over?” and focus on identifying the sustainable investment lines within the new paradigm. Monitor corporate earnings revisions, track the flow of maturing deposits into various asset classes, and stay attuned to policy cues from regulators like the China Securities Regulatory Commission (CSRC) (中国证券监督管理委员会). The opportunity in 2026 lies not in riding a tide, but in skillfully navigating its evolved currents. Recalibrate your portfolios to emphasize quality, profitability, and exposure to the unambiguous long-term trends reshaping China’s economy and its capital markets.