A-shares and Hong Kong stocks seen benefiting from reforms, earnings recovery, and global portfolio rebalancing
China’s equity markets are entering the early phase of a gradual but potentially long-lasting bull cycle, according to Bank of China (BOC), as structural reforms, improving corporate earnings, and shifting global capital flows converge.
In a newly released outlook, the state-owned lender said it is overweight on mainland A-shares and Hong Kong equities in 2026, arguing that China’s markets combine relatively attractive valuations with policy support and a more favorable global liquidity backdrop.
BOC expects the global financial environment to remain broadly accommodative this year, while China’s economy continues to expand at a pace above most major economies. The bank forecasts GDP growth of 4.7% to 5% in 2026, supported by proactive macro policies and a gradual recovery in domestic demand.
From Valuation Rebound to Earnings-Led Growth
2026 marks the first year of China’s 15th Five-Year Plan (2026–2030), a policy cycle that BOC believes will emphasize structural support and long-term economic resilience rather than short-term stimulus.
Senior executives at the bank said corporate profitability has reached an inflection point, a shift that could alter the character of China’s equity rally. While the market rebound in 2025 was largely driven by valuation repair, BOC expects earnings growth to play a more central role in 2026.
Citing projections from international institutions, the bank noted that non-financial Chinese listed companies are expected to post revenue growth of about 2.2% and profit growth of 5–8% this year.
If realized, this would mark a transition toward a more sustainable, “dual-engine” market expansion supported by both earnings growth and valuation re-rating.
Structural Forces Supporting a Re-rating
BOC International highlighted several longer-term forces that could underpin a re-assessment of Chinese equities:
Capital market reforms aimed at improving governance, disclosure, and long-term investment mechanisms
Economic transformation, including the shift toward advanced manufacturing and high-tech supply chains
Improved market infrastructure, enhancing the role of equities in capital allocation
Global asset diversification, as investors reassess exposure amid rising geopolitical and currency risks
The bank also pointed to expectations of gradual RMB appreciation, which could reinforce inbound capital flows and support equity valuations.
“Chinese assets are increasingly viewed not as conventional emerging market exposure, but as an integral part of global portfolios,” the report said, citing China’s role in high-tech supply chains and the broader global diversification away from US dollar–centric assets.
Wealth Management and Financial Opening
The outlook also touched on China’s efforts to expand household wealth and deepen financial opening. Policy discussions tied to the new Five-Year Plan include measures to raise household property income and promote the development of a more mature wealth management industry.
Reflecting this trend, Bank of China this week launched a new cross-border personal financial services platform, allowing clients to manage accounts across the Chinese mainland and Hong Kong through a unified interface.
What it means for global investors
For international investors, BOC’s outlook reinforces a growing narrative that China’s equity market is shifting from a tactical rebound story to a strategic allocation case.
If earnings growth continues to recover and capital market reforms gain traction, China could attract incremental long-term capital, particularly from investors seeking diversification, valuation discounts, and exposure to non-dollar assets. The implication is less about a sharp cyclical rally, and more about a slow re-entry of global capital into Chinese equities after several years of underweight positioning.