Chief Outlook | Shenwan Hongyuan's Wang Sheng: Don't Forget the "Slow" in the "Slow Bull" of A-shares in the Year of the Horse

【Editor’s Note】

2026 is the beginning of the “14th Five-Year Plan” period, marking China’s entry into a new development stage.

Under the new circumstances, international investment banks are continuously optimistic about China. Goldman Sachs recommends overweight positions in A-shares and Hong Kong stocks in 2026; JPMorgan Chase has upgraded the ratings of mainland China and Hong Kong markets to “Overweight”; UBS believes that policy support, improved corporate profits, and capital inflows could boost A-share valuations. These judgments reflect international capital’s recognition of China’s economic transformation and development prospects in 2026, and also suggest that as winter turns to spring, global capital may flow toward the East.

The “Chief Connection” market outlook for 2026, titled “Spring Water Flows East,” also conveys this meaning. In the outlook, the “Chief Connection” studio will interview dozens of authoritative economists, fund managers, and analysts to discuss their views on China’s economy in the new year and analyze new investment opportunities.

Recently, Wang Sheng, Director of Shenwan Hongyuan Research Institute, stated during the “Spring Water Flows East—‘Chief Connection’ 2026 Market Outlook” special on Pengpai News that the A-share market in the Year of the Horse is still expected to maintain a volatile upward trend.

“When confidence was low before, I always emphasized not to forget the ‘bull’ in ‘slow bull.’ But now that market confidence has risen, I also want to remind everyone not to forget the ‘slow’ in ‘slow bull,’” Wang Sheng said.

Wang Sheng pointed out that a slow bull does not happen overnight. It is important to grasp the market rhythm and be prepared for fluctuations; at the same time, view issues with a longer-term perspective and patience, fully enjoy the slow bull, and not overly focus on short-term market fluctuations and gains or losses.

Regarding allocation, Wang Sheng recommends investors focus on three areas: first, artificial intelligence, especially outstanding companies in A-shares and Hong Kong stocks in the application sector; second, new consumption, which still offers opportunities in 2026, with increased attention in the second half as PPI recovers; third, sectors related to PPI such as non-ferrous metals, crude oil, chemical industry chains, and sectors benefiting from “anti-involution.”

PPI: The Main Contradiction for A-shares in the Year of the Horse

“We believed at the end of 2024 that the main contradiction in the 2025 market would be the exchange rate (under trade friction and geopolitical influences, the RMB exchange rate will eventually appreciate without affecting exports). What about 2026? We think the main contradiction will be PPI (Note: In China, the Producer Price Index includes ex-factory prices and purchase prices. The ex-factory price index reflects the overall change in product prices in the industrial sector over a period, commonly called PPI).” Wang Sheng said that this year, macroeconomic factors related to ‘price’ are particularly important.

Wang Sheng emphasized that paying attention to PPI indicators requires not only focusing on the new economy but also monitoring whether traditional economic PPI can stabilize. After reaching a certain level of supply and demand adjustment, traditional industries need to achieve a new equilibrium.

“After structural adjustments in China’s traditional economy over these years, if overall momentum gradually stabilizes, it will be very significant for China’s capital markets. Therefore, this year’s PPI is the most worth watching,” Wang Sheng said.

However, Wang Sheng also noted that besides PPI, there are many fundamental changes worth looking forward to in 2026. For example, after years of accumulation, scientific research achievements are expected to continue erupting; the profit growth driven by PPI recovery is also very important; and the exchange rate remains crucial.

“Additionally, housing prices—if we see more solid signals of stabilization from mid-year to the second half of 2026—will further strengthen expectations of traditional economic momentum improvement driven by PPI recovery,” Wang Sheng further explained. “At that point, not only will the new economy have highlights, but traditional economy can also stabilize, laying a solid foundation for a long-term and slow bull market.”

The Interdependent Relationship Between the Stock Market and the Real Estate Market

Regarding housing prices, Wang Sheng stated that China’s stock market and real estate market have a mutually reinforcing causal relationship.

“If the stock market previously benefited from asset reallocation effects caused by the ‘housing not speculation’ policy in the real estate market, then the stock market’s rise will also feed back into the real estate market. If China’s capital market can remain relatively stable, with the Shanghai Composite Index maintained above 4,000 points, our real estate market will also benefit from the wealth effect of the stock market. This will naturally stimulate some improved residential demand,” Wang Sheng said.

He pointed out that, from this perspective, the launch of ‘good houses’ is highly significant. Unlike the earlier ‘old and small’ or ‘old and large’ properties, ‘good houses’ mean homes that make you feel very comfortable—such as higher ceiling heights, better privacy (lift and unit ratio), more reasonable structural design, and higher efficiency of use.

“Once the prices of good houses in core areas of first-tier cities stabilize or even slightly rise, the benchmark effect will be very prominent, boosting confidence in housing prices nationwide,” Wang Sheng further noted. “The most core variable influencing demand, especially in first-tier cities, is industry. As industry develops and attracts high-quality talent, it will further lead to stable or rising housing prices. The transformation and prosperity of the new economy are already bringing some changes to the real estate in certain areas.”

However, Wang Sheng emphasized that he does not believe nationwide housing prices will enter a new upward cycle but that the probability of stabilization has increased. He also stressed that real estate remains a livelihood project.

Capital Market Enters a Virtuous Cycle

On the capital side, Wang Sheng stated that overall, A-shares have entered a positive cycle.

“Many investors worry about the high proportion of margin financing in total trading volume, but I want to remind everyone that although the absolute volume of margin trading is high now, there is still considerable room before reaching extreme sentiment levels,” Wang Sheng said.

He pointed out that, on one hand, the overall market capitalization of A-shares has expanded significantly compared to before, so simple comparisons with historical indicators are not appropriate. On the other hand, “this 4000-point level is not the same as in 2015.” When the A-share index reached 4000 in the first half of 2015, financing sources were more diverse, including some off-market funds that were less accessible to regulators.

“After years of regulatory evolution and institutional improvements, the sources of funds for A-shares have become more standardized, with leverage mainly concentrated within the market. Although the absolute volume is large, current margin financing reflects a more concentrated, regulated, and transparent financing demand. Some off-market financing from earlier years is now also participating through on-market channels,” Wang Sheng explained.

Meanwhile, Wang Sheng noted that many people still do not fully understand changes in residents’ asset allocation, often relying on past experience and worrying that these savings are difficult to channel into equity investments. “It should be clarified that when residents’ overall asset allocation changes, regardless of the channel, part of it will eventually flow into the equity market.”

He gave examples: buying life insurance products involves some funds entering the stock market; similarly, debt-oriented hybrid funds and financial products with options also contribute. True institutional investors are always engaged in asset allocation. From this perspective, even if the scale of equity mutual funds has not expanded significantly, incremental funds from other financial products will long-term include some savings allocated to equities. This is a change in asset allocation, driven by both financial logic and China’s structural economic adjustments.

“Regarding foreign capital, once PPI and first-tier city housing prices stabilize, combined with exchange rate factors, we will see more signals of active foreign investment inflows,” Wang Sheng said. “Data shows that in recent years, most foreign investment into China has been passive, with some outflows of actively managed funds. But since Q4 2025, this pattern has been quietly changing—foreign capital is not only flowing in passively but also actively turning into net inflows.”

He concluded that overall, the proportion of foreign investment in China is increasing, in a slow bull process.

“Fundamentally, capital entering A-shares in various forms enriches the market ecosystem. ‘A hundred schools of thought contend’—diverse sources of funds are very beneficial for the capital market,” Wang Sheng said.

Don’t Forget the ‘Slow’ in ‘Slow Bull’ in the Year of the Horse

Looking ahead to the performance of A-shares in the Year of the Horse, Wang Sheng said that overall, the market is still expected to maintain a volatile upward trend.

“Previously, when confidence was low, I always emphasized not to forget the ‘bull’ in ‘slow bull.’ But now that confidence has risen, I also want to remind everyone not to forget the ‘slow’ in ‘slow bull,’” Wang Sheng said.

He pointed out that a slow bull does not happen overnight. It is essential to grasp the market rhythm and be prepared for fluctuations; at the same time, view issues with a long-term perspective and patience, fully enjoying the slow bull, and not overreacting to short-term market swings.

“In general, this year’s A-shares are still on a volatile upward trajectory. It will be a chapter in the long and slow bull process; and it will be a victorious chapter, a chapter of success. Overall, we can remain optimistic,” Wang Sheng stated.

For allocation, Wang Sheng recommends focusing on three areas: first, artificial intelligence, especially leading companies in A-shares and Hong Kong stocks in application sectors; second, new consumption, which still offers opportunities in 2026, with increased attention in the second half as PPI recovers; third, sectors related to PPI such as non-ferrous metals, crude oil, chemical industry chains, and sectors benefiting from “anti-involution.”

“He also reminded that, although technology stocks still have opportunities in 2026, they need to be more selective. After the valuation uplift in 2025, the success rate of stock picking may not be as high as in 2025. Meanwhile, value stocks are likely to catch up this year, and with PPI recovery, they will perform better. Focus on excellent value stocks,” Wang Sheng concluded.

(Article source: Pengpai News)