Low technology valuations + the continuous implementation of "anti-involution," foreign investment banks remain bullish on the Chinese stock market!

Against the backdrop of a global market full of uncertainties, several top foreign banks, including UBS, JPMorgan Chase, and Morgan Stanley, are coincidentally casting votes of confidence in the Chinese stock market for 2026.

According to news from the Wind Trading Desk, JPMorgan Chase holds a constructive view on the Chinese A-share market in 2026, expecting that the market will welcome structural upward opportunities driven by the "anti-involution" policy, the development of artificial intelligence, improvements in the global macro environment, and a differentiated recovery in consumption. In its baseline scenario, the bank sets the target for the CSI 300 index at 5,200 points by the end of 2026, noting that in a bull market scenario, the index is expected to reach 6,010 points.

UBS predicts that, driven by accelerating earnings and valuation recovery, the A-share market is likely to "reach new heights" in 2026, expecting the overall earnings growth rate of A-shares to rise from 6% in 2025 to 8%. It emphasizes that the current equity risk premium of A-shares is significantly higher than the historical average, providing substantial relative attractiveness compared to other markets. UBS believes that Chinese internet platforms have a first-mover advantage in AI monetization and are exceptionally undervalued, offering investors a rare opportunity for positioning.

Morgan Stanley states that 2026 will be a "stable year" following high returns in 2025, with limited upside for the index, moderate growth in corporate earnings, and valuations returning to a higher level of normalcy. As China re-establishes its footing in global technological competition and trade tensions ease, the market environment will become more robust.

JPMorgan Chase's Outlook for the A-share Market in 2026: CSI 300 Targeted at 5,200 Points, Focusing on Four Major Investment Themes

In the 2026 outlook report released by JPMorgan Chase on November 26, analysts believe that the target of 5,200 points corresponds to an upside potential of about 17%, with the valuation basis based on a 15.9 times price-to-earnings ratio according to Wind's consensus expectations. The report also provides targets of 6,000 points in a bull market scenario and 4,000 points in a bear market scenario.

The report elaborates on its four core logic points for being optimistic about the A-share market in 2026:

• Implementation of the "anti-involution" policy: The report expects that the "anti-involution" policy will accelerate its implementation next year. This will help improve the competitive landscape of industries, shifting from price and scale competition to quality competition, thereby structurally enhancing the net profit margin and return on equity (ROE) of the CSI 300 index constituents. Currently, market expectations for Chinese corporate profit margins in 2026 rank only in the middle of the Asia-Pacific market, indicating upside potential.
• AI Infrastructure and Monetization: The growth of global capital expenditure on AI infrastructure will directly benefit related Chinese suppliers. The report points out that as the process of localization and the commercialization of AI applications advance, more related targets will benefit from this.
• Improving Global Macro Environment: It is expected that fiscal and monetary policies in developed markets will trend towards easing in 2026, providing strong support for overseas sales of Chinese listed companies, especially those with a high proportion of exports.
• K-shaped Recovery in Consumption: The consumer market will show a differentiated recovery trend, with both low-end and luxury consumption sectors likely to benefit simultaneously, bringing investment opportunities to related sectors

UBS: Dual Recovery of Earnings and Valuation, A-shares Remain Attractive

UBS believes that Chinese technology companies not only have a relative advantage in valuation but also possess unique monetization potential in the global AI wave.

In a report on the 26th, UBS stated that Chinese internet platforms will achieve AI monetization earlier than their counterparts in other countries, while their valuation levels are "exceptionally cheap." In its global strategy, UBS considers the productivity improvements brought by generative AI as the core driver of a "reasonable" bubble in global stock markets, and China, as one of the leading regions in AI technology adoption, will benefit significantly. UBS lists "technological self-reliance" as a primary investment theme, pointing out that domestic substitution in key areas such as semiconductors and industrial robots is accelerating against the backdrop of geopolitical tensions.

On the valuation front, UBS emphasizes the relative attractiveness of A-shares. Currently, the equity risk premium (ERP) of A-shares is significantly higher than its historical average, while the ERP of the US and other major emerging markets has fallen below long-term averages. This indicates that the risk compensation available from investing in A-shares is relatively generous.

Morgan Stanley, on the other hand, stated that 2026 will be a "stable year" following high returns in 2025, with limited upside for indices, moderate growth in corporate earnings, and valuations returning to a higher level of normalcy. As China re-establishes its footing in global technology competition and trade tensions ease, the market environment will become more robust.

New Trend in Capital Flow: Shift of Household Savings and Long-term Capital Entering the Market

The positive changes in the capital landscape are another key pillar supporting foreign banks' optimistic expectations. UBS specifically pointed out in its report that the "reservoir" of funds in the Chinese market is undergoing a structural transformation.

As the real estate market enters an adjustment period and bank deposit rates continue to decline, household wealth is seeking new allocation directions, with the A-share market gradually becoming an important choice for absorbing this portion of funds. UBS data shows that although the ratio of total household deposits to the total market value of A-shares is expected to decline in the second half of 2025, it remains above historical averages, indicating that the potential for household savings to enter the stock market is still significant.

At the same time, the pace of long-term capital entering the market is accelerating. According to the report, as of the end of the third quarter of 2025, the scale of stocks and funds held by insurance funds has increased by 1.5 trillion yuan compared to the end of 2024. In addition, the market value management reform aimed at enhancing the quality and investment value of listed companies has also made substantial progress, with the total cash dividends of A-share companies expected to exceed 2 trillion yuan for the first time in 2025, and the scale of stock repurchases has also significantly increased. These measures are effectively enhancing the attractiveness of A-shares to long-term investors