Xinhua Asset's Wang Delun: A-shares expected by 2026; multi-dimensional reforms to safeguard long-term development

Recently, Wang Delun, General Manager of the Investment Department at Xinhua Asset Fund, stated in an exclusive interview with Shanghai Securities Journal that under the influence of multiple positive factors such as the continuous enhancement of overall economic competitiveness, the vigorous development of new-quality productivity, and supportive macro policy environments, China’s stock market is expected to show a steady and improving development trend by 2026.

China’s Stock Market Is Expected to Steady and Improve

“By 2026, China’s stock market will continue to move forward amid fluctuations,” Wang Delun said.

When discussing the reasons, Wang Delun provided his analysis:

First, China’s overall international comprehensive competitiveness is continuously improving, which is reflected in the capital markets as a rising valuation of Chinese assets.

Second, China’s economy has shifted from investment-driven to innovation-driven growth. This means that Chinese technological innovation has gradually evolved from mere followership to some degree of leadership. With the emergence of new-quality productivity enterprises represented by AI, the capital market will present more new investment opportunities, while traditional industries will also have more chances for transformation and reform.

Third, major economies around the world have generally adopted a “double easing” policy of fiscal expansion and monetary loosening. Based on historical experience, under the background of both fiscal and monetary policy easing, capital markets often demonstrate good performance.

Finally, in the process of building a strong financial nation, China’s stock market institutional environment is expected to gradually improve, market mechanisms are expected to be optimized, and a more solid institutional foundation for healthy capital market development has been established.

Multi-Dimensional Promotion of Long-Term Capital Inflows

Since September 24, 2024, China’s stock market has entered an upward channel. Behind this, policy and institutional support are indispensable. Regarding institutional development, Wang Delun is particularly focused on how to guide long-term funds into the market. He believes efforts can be continued in the following three areas:

First, cultivate stronger medium- and long-term institutional investors. Besides improving mechanisms, support the development of these institutions themselves. In practice, financial institutions are often constrained by capital size; to encourage long-term funds into the market, they should be given greater operational space and supported to increase their net assets.

Second, expand investment scope. Encourage long-term funds to enter the market. Just as a balanced diet requires variety, investment strategies and product mixes should be more diverse. Future policies could relax restrictions for institutional investors like insurance funds to invest in overseas ETFs, commodities, gold ETFs, cross-border mutual recognition funds, and to some extent, derivatives, thereby broadening investment channels.

Third, improve delisting mechanisms. The registration system has attracted high-quality new productivity enterprises to list, bringing “fresh water” into the market, but effective delisting mechanisms are also needed to ensure the survival of the fittest.

Asset Allocation Using the “442” Strategy

Looking ahead to 2026, which assets are worth expecting?

In the equity market, Wang Delun believes that assets denominated in RMB have medium- to long-term allocation value, and he is optimistic about the future performance of A-shares and Hong Kong stocks. However, he also reminds that while equity assets are generally positive in the medium to long term, valuations have risen significantly since September 2024, and yield expectations should be appropriately lowered this year. Specifically, Wang Delun expects that innovative-driven tech stocks, traditional cyclical manufacturing companies at low valuation levels with global competitiveness, and high-dividend blue-chip assets represented by central and state-owned enterprises will have long-term investment value.

Regarding other major asset classes, Wang Delun states that bonds, amid a long-term downward trend in interest rates, will experience some volatility in the medium term, and investors should seize phased allocation opportunities. In the context of de-globalization and supply chain rebuilding, commodities may enter a “super cycle.” Industrial products like copper and aluminum, in a supply-demand tight balance, are gradually beginning to present investment opportunities.

“Of course, it’s best not to overly concentrate on a single industry or track,” Wang Delun said.

For allocation strategies, Wang Delun recommends shifting from the traditional “721” allocation (70% real estate and fixed income, 20% financial assets, 10% commodities and equities) to the “442” strategy, which allocates 40% to stable foundations (fixed income, fixed income+ products, insurance products), 40% to increased equity holdings (A-shares, Hong Kong stocks, etc.), and 20% to alternative assets (such as commodities).

(Source: Shanghai Securities Journal)