Market consensus gradually formed, and corporate profits and incremental funds became the core twin engines.
The end of 2025 is about to come to an end. The Shanghai Composite Index has recently experienced six consecutive positive days, and market sentiment has picked up significantly. Investors have set their sights on 2026, and many institutions have recently released annual outlook reports intensively.
The mainstream view is that China's stock market is expected to continue its "slow bull" trend in 2026, driven by improvements in corporate profits, breakthroughs in technological innovation and attractive valuations. Among them, whether the Shanghai Composite Index can exceed 5,000 points has become one of the focuses of the market.
Profit-driven "Slow Bull" pattern
As the first year of the “15th Five-Year Plan”, the market has given expectations for transformation and high-quality development in 2026. Zhang Jun, chief economist of Galaxy Securities, pointed out that with the advancement of the economic rebalancing process, the formation of a mild reflation pattern, and the phased improvement of the internal and external environment, investing in the Chinese stock market in 2026 is expected to achieve significant excess returns.
The market consensus is that the driving logic is shifting from valuation repair to fundamentals. Meng Lei, a Chinese equity strategist at UBS Securities, predicts that the profit growth rate of all A-shares in 2026 is expected to further increase from 6% in 2025 to 8%. Goldman Sachs predicts that Chinese corporate profits will grow by 14% and 12% in 2026 and 2027 respectively.
Substantial improvement in corporate profits is considered the most critical factor supporting the market upwards. JP Morgan raised its rating on the Chinese market to "overweight". Liu Mingdi, head of equity strategy research for mainland and Hong Kong, said that under the base scenario, the target price forecast for the CSI 300 Index at the end of 2026 is 5,200 points.
Regarding the issue of Shanghai Composite Index points that investors are generally concerned about, institutions have different perspectives.
One view is that the market will fluctuate within a certain range and accumulate strength. Guests on China Business News' "Talk about Stocks and Money" program pointed out that the Shanghai Composite Index will fluctuate widely between 4,000 points and 5,000 points in 2026. This means that 5,000 points will become an important upper edge of the range and a psychological threshold.
Another view is more optimistic, believing that driven by earnings growth and capital, the index has the potential for a systematic upward trend. HSBC Global Research predicted in September 2025 that by 2026, the target level of the Shanghai Composite Index would be 4,500 points. The target levels for the entire market or major indexes given by some brokerages in their annual strategies also imply expectations that the Shanghai Composite Index will challenge higher levels.
The "triple resonance" of profits, funds and policies
Looking forward to 2026, the positive factors supporting the stock market are forming a synergy. Zhang Jun summarized it as the resonance of three core supporting logics: improvement of economic fundamentals, coordinated policy efforts, and relaxation of the external environment.
Corporate profitability is the foundation. The growth in profits not only comes from revenue expansion, but also benefits from the recovery of profit margins driven by the advancement of "anti-involution" policies. Daniel Morris, chief market strategist at BNP Paribas Asset Management, specifically pointed out that China’s greatest potential for profit growth is concentrated in the technology industry.
Incremental funding is the fuel. In 2026, the A-share market is expected to usher in an “incremental fund wave” that resonates with domestic and foreign capital. Changjiang Securities estimates that the potential incremental capital space in the A-share market in 2026 will be approximately 6 trillion yuan to 9.6 trillion yuan. This includes insurance funds, ETFs, private placements and possible return of foreign capital.
The policy environment is a guarantee. Macroeconomic policies are expected to maintain continuity and stability to underpin the economy and market. The functional positioning of the capital market continues to be strengthened, playing a key role in supporting technological innovation and creating wealth effects.
In terms of specific investment main lines, technological growth is unanimously considered by institutions to be the strongest main line running through this round of market conditions. Hard technology tracks such as artificial intelligence, computing power, and high-end manufacturing are expected to continue to lead the market. At the same time, high-dividend dividend assets as "ballast stones" also have important bottom position value.
In addition to opportunities, risks cannot be ignored. Zhang Jun reminded that the risks that the market may face in 2026 include that the U.S. economic recovery is less than expected, which may affect global trade demand, thereby dragging down China's exports. In addition, the evolution of the global macro environment, the geopolitical situation and the specific results of domestic economic transformation may bring volatility to the market.
International funds are expressing their views through actions. As of December 20, 2025, global ETFs investing in Chinese assets had received a cumulative net inflow of US$83.1 billion that year, with the technology sector receiving the largest inflow of foreign capital. Wang Ying, chief equity strategist at Morgan Stanley China, believes that it is “only a matter of time” before active funds increase their allocation to Chinese assets.
The market will enter a stage that relies more on fundamentals in 2026. When the "face" of corporate profits becomes solid, valuation improvements will come naturally. In the broad stage of 4,000 to 5,000 points, companies with real growth potential will lead the market through shocks and draw a new value curve.
