According to a report by China Daily on February 24…
SHANGHAI — China’s equity market may be entering a phase of cyclical earnings recovery combined with structural technology upgrading, creating what some global investors see as a compelling allocation opportunity.
Wong Kok Hoi, founder and executive chairman of APS Asset Management, said the firm has gone “all in on China,” citing long-term growth potential driven by technological upgrading and improving corporate profitability.
The remarks were made at the launch of the CEIBS–APS Center for Financial Markets in Shanghai, a platform aimed at helping international investors better understand China’s evolving capital markets.
Earnings Recovery + Technology Upgrade
Wong expects A-share listed companies to deliver double-digit profit growth in 2026, supported partly by a low base but more importantly by strength in advanced industries, including:
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Semiconductors
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Artificial intelligence applications
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Biomedicine
If realized, earnings acceleration could provide a fundamental driver for index-level performance, rather than purely liquidity-led rallies.
For global managers who have remained structurally underweight China in recent years, a sustained earnings rebound would challenge that positioning.
Valuation Gap and Dividend Support
Chinese equities continue to trade at valuation discounts relative to major developed markets.
At the same time:
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The average dividend yield in the A-share market is around 3.5%
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Household bank deposits total roughly $22 trillion — exceeding annual GDP
With deposit rates significantly below dividend yields, any gradual policy encouragement toward equity participation could redirect domestic liquidity into the stock market.
From an allocation perspective, dividend yield support combined with earnings recovery reduces downside asymmetry.
Correlation Advantage in a Fragmented World
One of Wong’s central arguments is portfolio construction rather than pure growth.
China’s equity market historically shows lower correlation with US and European markets compared with developed-market cross-correlations. In an environment of:
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Elevated geopolitical fragmentation
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Concentration risk in US mega-cap technology
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High valuations in developed markets
China exposure may function as a diversification sleeve rather than a directional growth bet.
For global asset allocators facing benchmark concentration risk, this structural diversification argument is increasingly relevant.
AI: Bubble Risk or Profit Engine?
On artificial intelligence, Wong draws a distinction between capital-intensive infrastructure plays and application-layer companies.
He notes that:
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Large language model developers and data center operators may face financing sensitivity
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Application-layer AI companies benefit from lower development costs
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Semiconductor manufacturers remain direct beneficiaries of global AI-driven demand for computing power
This framework suggests selective positioning within China’s technology complex rather than broad thematic exposure.
Structural vs Cyclical Headwinds
Wong acknowledged ongoing pressure in property and consumption but characterized them as cyclical adjustments rather than structural impairments.
He argues that China’s:
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Industrial depth
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Engineering talent base
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Scale of domestic demand
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Rapid technology deployment
Continue to underpin long-term earnings capacity.
Allocation Takeaways for Global Managers
For international fund managers, the China case in 2026 may rest on four pillars:
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Earnings inflection potential
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Valuation discount to developed peers
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Attractive dividend yields
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Low cross-market correlation
If these conditions persist, China equities could transition from a tactical trade to a strategic allocation component.
The key risk remains policy execution and the pace of domestic demand recovery. But for managers seeking diversification amid concentrated global portfolios, China may increasingly be evaluated less as a macro risk story and more as a portfolio construction opportunity.