– The A-share market concluded 2025 with a structural slow bull, characterized by significant index gains but pronounced sector divergence, setting the stage for a complex 2026. – Funds flow in 2025 shifted towards ETFs, ‘fixed income+’ products, and quant strategies, reflecting gradual deposit migration and changing investor preferences. – Looking to 2026, the market focus transitions from valuation repair to profit growth, with domestic demand recovery and AI sectors under scrutiny as key drivers. – Expert opinions highlight opportunities in technology and resources, alongside risks from volatility and fund positioning, requiring disciplined investment strategies. – The ’15th Five-Year Plan’ opening year provides macroeconomic tailwinds, but sustainable profits hinge on corporate earnings and policy support for the slow bull market’s continuity. The dawn of 2026 finds China’s A-share market at a pivotal juncture, having solidified a slow bull market throughout 2025. With the Shanghai Composite Index reclaiming the 4,000-point level and major indices posting double-digit gains, the narrative has evolved from mere recovery to a more complex, structurally-driven advance. This slow bull market is characterized not by uniform exuberance but by selective momentum, where technology and manufacturing sectors soared while others lagged. As we enter the opening year of China’s ’15th Five-Year Plan,’ the market’s trajectory will increasingly hinge on the transition from liquidity-driven valuation repairs to fundamentals-driven profit growth. Investors worldwide must now decipher whether this slow bull market can maintain its pace and broaden its base, making domestic demand and corporate earnings the central themes for the year ahead.
Reviewing 2025: The Anatomy of a Structural Slow Bull Market
The year 2025 will be remembered as a period where China’s A-share market embraced a slow bull market, defined by persistent upward momentum in indices coupled with stark internal divergences. By December 31, the Shanghai Composite Index had climbed 18.41%, the Shenzhen Component Index surged 29.87%, and the ChiNext Index skyrocketed 49.57%. Nearly 80% of stocks rose, with over 500 doubling in value, yet the investor experience varied dramatically due to concentrated sector performance. This structural slow bull market underscored a shift from broad-based rallies to targeted opportunities, driven by policy and technological advancements.
Index Gains Mask Sector Polarization
Data from Wind (万得) reveals that while the Communications and Non-ferrous Metals sectors more than doubled in 2025, nearly half of the Shenwan primary industries gained less than 30%. The Food and Beverage sector was the sole decliner, down 1.62%. This disparity highlights the entrenched nature of the slow bull market, where growth was uneven. As Li Xunlei (李迅雷), Chief Economist at Zhongtai International, noted, ‘We are dominated by a stock economy, corresponding to structural opportunities. In the past, when one prospered, all prospered, but now this differentiation is becoming increasingly obvious.’ The market’s resilience was tested mid-year by external shocks, such as U.S. tariff actions, but swift regulatory responses and ‘national team’ interventions helped stabilize the slow bull market trajectory.
Consensus and Divergence in Market Narratives
Throughout 2025, consensus emerged around the long-term value of Chinese assets and a shift from liquidity-driven to profit-driven investment logic. However, disagreements persisted over the pace and strength of domestic demand recovery, as well as the valuation-earnings匹配 in growth sectors like artificial intelligence. Tian Xuan (田轩), Dean of the National Institute of Financial Research at Tsinghua University, observed, ‘This round of bull market shows strong structural characteristics and policy sensitivity, forming a sharp contrast with past comprehensive bull markets.’ The slow bull market’s evolution was marked by investor skepticism, with many missing out on gains due to cautious participation, reinforcing that this phase remains in its early stages.
Deconstructing the Funds Narrative: Gradual Deposit Migration Reshapes Flows
The liquidity underpinning the slow bull market in 2025 came not from a tidal wave of retail enthusiasm but from a meticulous, multi-channel migration of savings into risk assets. Liu Chenming (刘晨明), Chief Strategist at GF Securities, summarized that regulatory policies and insurance capital入市 curbed downside risks, while domestic deposit搬家 and overseas dollar溢出资金 opened upside space. This gradual shift, rather than a sudden influx, has been crucial in sustaining the slow bull market without overheating.
The ETF Boom and Active Fund Redemptions
ETF scale expanded dramatically, with total domestic ETF assets soaring from CNY 3.7 trillion at the start of 2025 to over CNY 6 trillion, adding more than CNY 2 trillion annually. This growth was propelled by policy support, including a fast-track registration mechanism for stock ETFs, and significant purchases by ‘national team’ entities like Central Huijin. In contrast, actively managed equity funds faced net redemptions despite rising net asset values, as investors cashed in on recoveries. According to兴证 Strategy, in Q3 2025, three types of active偏股 funds saw net redemptions of 220 billion units, totaling CNY 290 billion in outflows. This divergence underscores how the slow bull market is being fueled by indirect, tool-based investment rather than direct stock picking.
The Rise of ‘Fixed Income+’ and Quantitative私募
‘Fixed income+’ funds, which blend bonds with equity exposure, exploded in popularity, with assets under management reaching CNY 2.28 trillion by Q3 2025, up 31.89% quarter-on-quarter. These products catered to risk-averse investors seeking yield in a low-interest-rate environment. Meanwhile, quantitative私募 saw landmark growth, with the number of billion-yuan quant funds surpassing subjective long-only funds for the first time. Li Chunyu (李春瑜), FOF Fund Manager at Rongzhi Investment, attributed this to strong performance, stable returns, and regulatory clarity. Additionally, insurance and social security funds played a stabilizing role, with insurance equity holdings rising to CNY 3.62 trillion by Q3 and the National Social Security Fund increasing its holdings by over 10%. These flows have reinforced the structural nature of the slow bull market, concentrating liquidity in specific sectors.
Looking Ahead to 2026: The Next Phase of Asset Revaluation
As the slow bull market sails into 2026, the emphasis shifts decisively from valuation repair to profit growth. The commencement of the ’15th Five-Year Plan’ offers macroeconomic tailwinds, but the market’s ascent will depend on concrete improvements in corporate earnings and domestic demand. This phase of the slow bull market will test whether underlying fundamentals can catch up with market optimism, making it a critical year for long-term investors.
Macroeconomic Signals and the Domestic Demand Imperative
Yu Bo’s team at Changjiang Macro believes that the three major risks plaguing 2025—Sino-U.S. trade friction, real estate market下行压力, and local government debt—are likely to ease in 2026, creating a favorable environment. Qiu Xiang (裘翔), Chief A-Share Strategist at CITIC Securities, argues that market confidence has been boosted by policy, technology, and external demand, but still lacks the内需 component. ‘If domestic demand expectations can be重塑, the market有望再上台阶 in 2026,’ he stated. Liu Gang (刘刚), Chief Overseas and Hong Kong Stock Strategist at China International Capital Corporation Limited (中金公司), echoed this, noting that倾斜 in民生,社保,扩内需, and化债 would help alleviate economic drags. However, Xing Ziqiang (邢自强), Chief China Economist at Morgan Stanley, warned that without real estate stabilization, relying solely on advanced manufacturing might not break the low-price循环, potentially challenging the slow bull market’s breadth.
Investment Opportunities: AI, Resources, and Cyclical Recovery
Artificial intelligence remains a focal point for the slow bull market’s growth trajectory. Dan Bin (但斌), Chairman of Oriental Harbor, expressed optimism: ‘2026 could be the year of AI application explosion.’ Zhou Yingbo (周应波), Founder of Yunzhou Capital, views AI as a two- to three-decade cycle still in its early stages. However, Zhu Ning (朱宁), Finance Professor at Shanghai Jiao Tong University’s Shanghai Advanced Institute of Finance, cautioned that ‘a good product, a good enterprise, and a good investment can be completely different concepts.’ Others favor resource sectors, with Wang Wen (王文), Chairman of Ridou Investment,倾向于 ‘water sellers’ like non-ferrous metals, oil, power, and coal. Liu Jie (刘杰), Director of Equity Research at Harvest Fund, is bullish on copper and aluminum, while Wu Youhui (武幼辉), Head of Macro Strategy at GF Fund Management, sees AI infrastructure creating new demand for commodities. Cyclical sectors also attract attention, with Lin Yingrui (林英睿), Fund Manager at GF Fund, noting基本面拐点 in industries like aviation.
Navigating Risks and Strategies for the 2026 Slow Bull Market
The continuation of the slow bull market in 2026 is not without hazards. Volatility in科技 and growth sectors could trigger repositioning by绝对收益-focused funds, which accumulated high concentrations in Q3 2025. Lin Yingrui warned of potential调仓压力 if these sectors experience sustained fluctuations, highlighting the need for vigilant risk management in this evolving slow bull market.
The Path to Sustainable Profits and Market Maturity
Qiu Xiang highlighted that Chinese manufacturing commands high global share but low profit share, with room for improvement through enhanced pricing power. Li Xunlei added that while the current market rise is driven by risk偏好, sustained profit回升 requires PPI turning positive and居民收入 growth. ‘If fiscal policy becomes more aggressive and urban-rural income growth plans are effectively implemented, the foundation for the slow bull market will be more solid,’ he said. Investors must focus on sectors with clear earnings visibility, such as those aligned with new quality生产力, to thrive in this slow bull market environment. In summary, the A-share slow bull market’s entry into 2026 presents a landscape rich with structural opportunities but fraught with complexity. The convergence of政策红利, deposit migration, and global capital flows has set the stage, yet the ultimate driver will be corporate profitability and domestic demand复苏. As this slow bull market progresses, staying informed on macroeconomic indicators and regulatory shifts will be crucial for capitalizing on China’s ongoing asset revaluation journey. Investors should adopt a disciplined, research-driven approach, diversifying across sectors with strong fundamentals and preparing for potential volatility. The call to action is clear: engage with precision, prioritize earnings growth over mere valuation, and leverage strategic insights to navigate the next phase of this enduring slow bull market successfully.