Sustained bull run set to spur spending

While a structural bull run is gradually taking shape in the A-share market thanks to China's economic resilience and continued introduction of supportive policies, the upward momentum is likely to further stabilize driven by technological advances, which will buoy investor confidence and consumption, said experts.

Data from market tracker Wind Info showed that the benchmark Shanghai Composite Index surged over 12 percent in the third quarter, with the Shenzhen Component Index soaring nearly 30 percent. Qualified foreign institutional investors have thus stepped up their exposure to A shares, and can be found on the top-10 shareholder list for at least 37 A-share companies, holding nearly 6.3 billion yuan ($880 million) in value.

Goldman Sachs said on Wednesday that the benchmark indexes still have room for 30 percent upside potential by the end of 2027, as China's bourses will enter a more sustained upward phase. This will be mainly fueled by the 12 percent earnings growth and an additional 5 to 10 percent revaluation.

Kinger Lau, chief China equity strategist at Goldman Sachs, said more policies to stimulate demand and the new five-year plan in the pipeline will help to rebalance growth and mitigate internal risks. While artificial intelligence is reshaping the profit landscape, bottom line increases driven by AI capital expenditure are also materializing.

Chinese shares are still deeply discounted relative to global peers. Against this backdrop, there could be trillions of dollars available for reallocation to Chinese assets. As an A-share market bull run proceeds, the dominant investment style should shift to buying when short-term fluctuations occur, Lau said.

Allen Lee, head of China business development for international asset manager AllianceBernstein, said the A-share market is likely to enter a structural upward trend, mainly driven by companies' improving profitability. The moderately relaxed policy environment and an overall market revaluation will further fuel momentum.

Instead of being distracted by short-term fluctuations, investors should seize the "historic opportunities" in the long-term development of the Chinese stock market and focus on quality companies capable of improving their profitability in a more sustained manner. Technology and new consumption companies will directly benefit from China's economic restructuring and industrial upgrading, providing investors opportunities to participate in the structural bull run, he said.

HSBC Global Investment Research said in a report in late September that over half of investors hold a most positive outlook on the A-share market.

About 33 percent of those polled in September believe that expected capital flows out of the United States will serve as the best catalyst for bullish performance in emerging markets, according to the report.

Zhou Zejiang, head of the School of Business at Anhui University, wrote in an op-ed recently published in Study Times that a stable stock market is crucial to boost consumption by increasing household wealth, as well as stabilizing market sentiment and expectations.

Therefore, the bourses should further carry out information disclosure, optimize market mechanisms by enriching product supply and improving liquidity, strengthen investor protections and better coordinate policies among different economic sectors. All these efforts are conducive to a wholesome circulation between investment and consumption, Zhou said.

Yang Delong, chief economist at First Seafront Fund, also said that a bull market run is the best driver for robust consumption. A sustained tech boom is likely to further drive up the major indexes, truly increasing household wealth and disposable incomes. This is the very foundation for boosting spending appetites, he said.

shijing@chinadaily.com.cn