Three Major A-Share Breakthroughs: What They Signal for China’s Bull Market Trajectory

Market Momentum and Context

Chinese equities hit milestone after milestone in July 2025, with over 4,000 stocks advancing simultaneously across exchanges. The Shanghai Composite Index reclaimed the psychologically critical 3600-point threshold despite repeated downward pressures, demonstrating remarkable resilience. This breakthrough accompanies two other technical achievements: the CSI 1000 ETF surpassed its March peak, while the average share price across A-shares climbed above its previous year’s high. These synchronized breakthroughs suggest developing broad-based strength rather than narrow rally leadership.

Five-Dimensional Market Analysis

Bull-Trend Participation Metrics

Approximately 3,061 stocks displayed bullish technical formations as of late July – significant expansion from spring levels but notably below 2024’s peak of 4,700. This gap indicates room for additional upside without immediately signaling market exhaustion.

Leverage Positioning Fundamentals

Margin debt balances approached 1.9 trillion yuan ($262 billion), but leverage ratios (financing balance-to-float cap) remain conservatively positioned at 2.24%. This falls below:

– Quarter-end highs earlier in 2025
– Historical danger zones like 2015’s 4.6% peak
– Current global leverage averages

Valuation Perspectives

Key indices show divergent valuation patterns:

Outside mainland exchanges, Hong Kong-listed H-shares attract attention for their relative value. UBS strategist Wang Zonghao (王宗豪) maintains bullishness despite short-term competitive pressures in sectors like delivery services.

The Catalysts Fueling Confidence

Sector Rotations Indicating Health

Recent rebounds in neglected sectors like renewable energy (via Yalong River hydropower investments) and Hainan special economic zone developments demonstrate capital spreading beyond crowded trades. These recoveries following abrupt selloffs reveal improving market digestion mechanics.

Monetary Tailwinds Persist

Chinese liquidity metrics remain supportive:
– M1 money supply growth accelerating since June
– Policy rates anchored near multi-year lows
– Household savings deposits grow nearly 48% since 2022 to 162 trillion yuan
– Equity risk premiums exceeding government bonds by 130 basis points

Strategic Implications for Investors

Reassessing Entry Timing

Historical parallels to selective bull markets (2014’s reform rally, Q3 2021 tech surge) gain attention amid debate. However, three distinctions worth noting:

– Margin buffers surpass previous episodes
– Earnings recession potentially bottoming
– Policy impetus strengthening incrementally

Small-Cap Opportunities Emerge

Leadership in CSI 1000 components signals pent-up demand in mid-market innovators. Over 1,360 stocks still trade below April tariff-influenced levels, creating valuation disparities versus large-cap counterparts.

Balancing Domestic and Global Exposure

As U.S. markets trade at 28x earnings (per S&P 500), the valuation gap favoring China equities reaches near-record widths. International institutions monitor convergence potential via:

– Qualified Foreign Investor scheme expansions
– Dual-listing arbitrage channels
– Passive ETF inflows tracking Chinese benchmarks

Notice: The current A-shares surge combines technical validation with fundamentally improving optics. While prudent risk management remains essential during acceleration phases, underpriced liquidity advantages and recovering corporate profitability sustain recovery runway. Assess exposure through sector diversification including neglected cyclical names poised for policy tailwinds. Track CSI 1000 leadership indicators daily at Shenzhen Stock Exchange data portals to validate sustainability.