UBS Securities China equity strategist stated on the 19th that due to significantly improved market sentiment, the medium-term outlook for Chinese stocks is positive.
According to the analysis, since August, the wealth effect from the major A-share indices breaking through the October 2024 highs has gradually attracted off-market funds. Recent public and private fund issuances have been significantly higher than last year’s average, and long-term funds represented by insurance capital are also actively entering the market.
“This year, equity-oriented public funds have achieved an overall return of 17%, reversing the weak performance of the past three years when they underperformed the index.” From a historical perspective, the scale of new public fund issuances typically lags behind stock market performance. That is, as the stock market and fund performance recover, the scale of new public fund issuances in China is expected to gradually increase, forming a positive cycle.
According to estimates, the “Implementation Plan for Promoting Medium- and Long-Term Funds to Enter the Market” jointly issued earlier this year by the Central Financial Office, the China Securities Regulatory Commission, and the Ministry of Finance is expected to drive insurance capital’s net inflow into equity assets to reach 1 trillion yuan (RMB) by 2025. Insurance capital will continue to enter the market in the second half of the year.
“Additionally, we note that the average daily trading volume in the A-share market was 1.39 trillion yuan in the first half of this year, 1.63 trillion yuan in July, and has increased to 1.95 trillion yuan so far in August, indicating that individual investor sentiment is also improving.”
