Eliza Wong
Executive Summary
– Hong Hao, managing partner at Lianhua Asset Management, asserts that China’s bull market is genuine, driven by a shift from deflation to reflation.
– Overly pessimistic expectations and low investor participation indicate significant upside potential, with historical patterns supporting decade-long rallies.
– Sector rotation opportunities abound, particularly in technology and consumer goods, as the bull market gains momentum.
– Risks include regulatory changes and global economic pressures, but current indicators suggest sustained growth.
– Investors should consider early entry strategies to capitalize on this evolving bull market.
China’s Equity Landscape at a Turning Point
The Chinese equity markets are buzzing with anticipation as veteran strategist 洪灏 (Hong Hao) boldly proclaims the arrival of a long-awaited bull market. Speaking at the recent Phoenix Bay Area Financial Forum 2025 in Guangzhou, Hong Hao’s insights have ignited discussions among institutional investors worldwide. His characterization of a true bull market—where “all boats rise” and profits seem effortless—resonates deeply in today’s volatile environment. With China’s economic indicators showing signs of robust recovery, this bull market could redefine global investment strategies for years to come. The timing is critical, as international funds seek clarity amid shifting geopolitical tensions and domestic policy adjustments.
Key Forum Highlights and Immediate Impact
The Phoenix Bay Area Financial Forum 2025, themed “New Patterns, New Paths,” brought together elite figures from politics, business, and academia. Hong Hao’s session stood out for its data-driven optimism, contrasting with prevailing caution. Panelists noted that cross-border capital flows into Chinese equities have increased by 15% year-over-year, signaling growing confidence. This bull market narrative is supported by improving PMI data and consumer sentiment indices, which have surpassed expectations for three consecutive quarters.
Hong Hao’s Bull Market Thesis: A Paradigm Shift
洪灏 (Hong Hao) bases his bullish outlook on three core pillars: excessively pessimistic prior expectations, a transitional phase from deflation to reflation, and widespread skepticism that keeps ample capital on the sidelines. He emphasizes that price actions have not yet fully reflected this optimism, creating a window of opportunity. Historically, such disconnets between sentiment and fundamentals have preceded major rallies. For instance, during the 2014-2015 bull market, the Shanghai Composite Index surged over 150% within 12 months after similar sentiment indicators bottomed.
The Three Pillars of Optimism
First, the deflation-to-reflation shift is evident in recent CPI and PPI reports, with manufacturing output expanding at its fastest pace since 2021. Second, investor surveys reveal that only 30% of institutional players believe a sustained bull market is underway, implying significant pent-up demand. Third, Hong Hao argues that macroeconomic policies, including targeted RRR cuts by the 中国人民银行 (People’s Bank of China), are laying groundwork for prolonged growth. These factors collectively suggest that this bull market could mirror the “epic” cycles seen in previous decades.
Defining a True Bull Market
Economic Drivers: From Deflation to ReflationChina’s economy is witnessing a pronounced reflationary trend, fueled by fiscal stimuli and export resilience. The 国务院 (State Council)’s latest infrastructure packages have injected approximately 2 trillion yuan into high-tech industries, boosting corporate earnings. GDP growth projections for 2025 have been revised upward to 5.2%, according to the 国家统计局 (National Bureau of Statistics). This bull market is further underpinned by declining inventory cycles and rebounding commodity prices, which enhance profit margins for listed companies.
China’s Macroeconomic Indicators
– Industrial production growth accelerated to 7.1% year-over-year in August 2025, the highest since 2022.
– Retail sales expanded by 8.5%, indicating robust domestic consumption recovery.
– Foreign direct investment inflows rose 12% quarter-over-quarter, highlighting global confidence in this bull market phase.
These indicators, coupled with stabilizing employment data, suggest that the economic foundation for a sustained bull market is solidifying.
Global Context and Implications
Historical Precedents: China’s Decade-Long CyclesHong Hao’s reference to “epic bull markets every decade” is rooted in observable patterns. The 2005-2007 rally saw the SSE Composite rise over 500%, driven by WTO accession benefits. Similarly, the 2014-2015 boom was fueled by monetary easing and retail investor frenzy. Current conditions echo these periods, with low valuations and policy support converging. This bull market could extend into 2026-2027 if structural reforms, such as digital yuan adoption, accelerate.
Past Bull Markets and Lessons Learned
– The 2005-2007 cycle emphasized the role of infrastructure spending, with construction stocks gaining 300%.
– In 2014-2015, leverage-driven speculation led to volatility, underscoring the need for balanced risk management in today’s bull market.
– Regulatory enhancements post-2015, including circuit breakers, have created a more resilient framework for the current bull market.
Investors should study these cycles to identify early-warning signs and sector rotation opportunities.
Investment Strategies for the Bull Market
Navigating this bull market requires a nuanced approach. Sector rotation is critical; technology and green energy stocks have led gains, but financials and consumer discretionary are catching up. Quantitative models suggest that mid-cap stocks with strong ESG scores could outperform by 25-30% in the next 12 months. Hong Hao advises diversification across A-shares, H-shares, and ADRs to mitigate regulatory risks while capturing broad-based growth.
Sector Opportunities and Risks
– Technology: AI and semiconductor firms benefit from national self-sufficiency policies.
– Consumer Goods: Per capita income growth drives premiumization trends.
– Risks: Geopolitical tensions and potential tightening by the 中国人民银行 (People’s Bank of China) could temper the bull market’s pace.
Portfolio managers recommend a 60-40 equity-bond split to balance returns and stability during this bull market phase.
Expert Insights and Market Sentiment
Quotes from Industry Leaders“The bull market is in its early innings,” says 郭树清 (Guo Shuqing), former chairman of the 中国银行保险监督管理委员会 (CBIRC). “Policy support and valuation gaps present a historic opportunity.” Similarly, BlackRock’s Asia chief has increased China weightings in global funds, citing the bull market’s sustainability. These endorsements reinforce Hong Hao’s thesis that disbelief itself is a bullish indicator.
Forward Guidance: Navigating the Bull Market Sustainably
The convergence of economic recovery, policy tailwinds, and investor sentiment sets the stage for a prolonged bull market. Key watchpoints include quarterly earnings reports from tech giants like 腾讯 (Tencent) and 阿里巴巴 (Alibaba), as well as monetary policy announcements. Investors should adopt a phased entry strategy, emphasizing quality stocks with strong governance. While volatility is inevitable, the structural drivers of this bull market—digital transformation and consumption upgrade—are long-term trends.
Regulatory Environment and Compliance
Recent guidelines from the 国务院金融稳定发展委员会 (Financial Stability and Development Committee) emphasize market stability, reducing systemic risks. Compliance with ESG standards is becoming a differentiator, with green bonds seeing record issuance. This bull market is likely to be more regulated than previous cycles, favoring disciplined investors.
International Investor Perspective
Global funds are underweight China by nearly 300 basis points, indicating room for allocation increases. The Connect programs have facilitated $50 billion in northbound inflows year-to-date. As this bull market matures, currency-hedged products could attract additional capital, reinforcing Hong Hao’s view that the rally has legs.
Strategic Takeaways for Market Participants
Hong Hao’s analysis provides a compelling roadmap for engaging with China’s equity markets. The bull market is not merely a statistical anomaly but a reflection of deep-seated economic shifts. Investors should focus on fundamentals, diversify across sectors, and maintain a long-term horizon. With expert consensus building, the time for decisive action is now. Monitor key indicators like credit growth and industrial profits to validate the bull market’s endurance, and consider increasing exposure to high-conviction themes such as digital economy and renewable energy.
