Broker Outlook for 2026 Shanghai Composite Index: Slow Bull Launch or Continued Structural Recovery?

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Looking ahead to 2026, brokers have core divergence on characterizing China’s A-share market. Will the market launch a “low-volatility slow bull,” or continue “structural recovery” trend? Consensus across parties is that “earnings recovery” is the main driver, pushing the market to oscillate upward. Some institutions predict the Shanghai stock index may rise moderately, but the investment key lies in grasping structural opportunities.

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Views from institutions like UBS provide support:

• China’s tech sector earnings significantly grow due to artificial intelligence innovation.
• Healthy liquidity and reasonable valuations will support the overall market.
• Strong earnings performance is an important foundation for Shanghai stock index upward movement.

Key Takeaways

• In 2026, China’s A-share market will be driven by corporate earnings growth, overall oscillating upward.
• Market rise is not all stocks rising but some sectors and companies performing well – this is called “structural recovery.”
• Three investment directions deserve attention: technological innovation, Chinese enterprises going global, and high-dividend stocks and cyclical sectors.
• Investors need to note global economic and geopolitical risks, as well as potential impacts from domestic policy changes in China.

Market Characterization: Slow Bull Launch or Structural Continuation?

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Looking ahead to 2026, major brokers’ core judgment on A-share market tends consistent: the market will be earnings-driven, showing oscillating upward trend. However, divergence remains on the specific nature of the trend. Some views like CITIC Securities lean toward “low-volatility slow bull market,” while CICC and Morgan Stanley describe it as “oscillating upward” or “moderate rise.” Regardless of labels, the underlying logic points to three core drivers: earnings recovery, globalization transformation, and capital pattern changes.

Earnings Recovery: Core Driver of Growth

Earnings recovery becomes market consensus, the strongest power supporting A-share upward in 2026. With macroeconomic stabilization and corporate profitability improvement, multiple institutions give positive forecasts. Everbright Securities analysis believes that in 2026, China’s A-share non-financial sector earnings growth may rebound to around 10%, providing solid fundamental support for the market.

International investment banks’ views also confirm this trend. Morgan Stanley in its base scenario expects 2026 EPS growth at 6%, bull scenario 8%. Invesco similarly points out corporate earnings already show clear recovery signs.

J.P. Morgan’s Optimistic Forecast J.P. Morgan’s forecast is particularly noteworthy. The institution predicts MSCI China Index EPS growth rate will jump significantly from 2% in 2025 to 15% in 2026. Tech companies become key engine for this earnings growth round, with annualized earnings growth expected to exceed 30% over the next two years.

This series of data shows earnings growth is no longer distant expectation but ongoing reality. Strong earnings performance lays foundation for moderate rise in Shanghai stock index.

Globalization Transformation: Reshaping A-Share Fundamentals

Chinese enterprises’ globalization process is reshaping A-share fundamentals, opening a second curve for earnings growth. Facing overcapacity and fierce competition in some mainland China market sectors, more capable enterprises turn eyes global, seeking broader growth space. This transformation brings significant positive impacts:

• Revenue Source Diversification: Enterprises reduce dependence on single economy by expanding overseas markets. This enhances resistance to cyclical fluctuations and policy uncertainty, significantly improving earnings stability.
• Opening New Growth Space: Goldman Sachs research shows its focused 25 leading Chinese companies have overseas revenue accounting for about 34% of total, with stock performance far exceeding market average. This indicates globalization strategy has become effective path for enterprise value growth.
• Business Model Upgrade: Globalization is no longer simple product export. Chinese enterprises shift from low-cost manufacturing to exporting services, technology, intellectual property, and business models. For example, companies like BYD and Pinduoduo succeed globally with technological and model innovation.

Analysts point out that as more profits flow back from overseas subsidiaries, Chinese enterprise earnings will increasingly depend on global consumption trends. This shift from “China exposure” to “global exposure” is one of core logics supporting A-share long-term value.

Capital Pattern: Absolute Returns Dominate Low Volatility

Market participant structure and behavior patterns determine trend volatility characteristics. Current A-share market capital pattern is increasingly dominated by institutional investors pursuing absolute returns. These funds, represented by insurance, bank wealth management, and social security funds, core demand is controllable risk with steady returns, not chasing short-term windfalls.

This capital pattern brings two significant changes:

1. Reduced Market Volatility: Absolute return investors prefer reasonable valuation, stable cash flow, high-dividend assets. They tend to buy on market dips and sell on overheat, naturally acting as “stabilizer,” suppressing index sharp ups and downs.
2. Structural Trends Become Norm: Due to huge differences in valuation, prosperity, and growth across sectors, absolute return funds more finely allocate between industries and stocks. Funds do not “broad rise” into market but precisely flow to areas with deterministic opportunities.

Thus, even if index overall shows “slow bull” trend, internal differentiation will be extremely sharp. Investment focus shifts from judging index rise/fall to identifying and grasping structural alpha opportunities.

Shanghai Stock Index: Oscillating Upward Driven by Earnings

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With “earnings recovery” and “structural differentiation” as market consensus, investors need clear specific investment directions. 2026 macroeconomic environment provides soil for moderate rise in Shanghai stock index. Active fiscal and monetary policies will jointly exert force, injecting liquidity into market and lowering corporate financing costs.

2026 Macro Policy Outlook

• Economic Growth: Mainland China GDP growth target expected in 4.6% to 4.8% range, providing stable expectations for economy.
• Fiscal Support: Fiscal policy remains expansionary, deficit ratio may rise, special bonds and special treasury bonds scale significantly increase, funding infrastructure and key projects.
• Monetary Easing: Monetary policy expected moderately loose, central bank may cut policy rates and reserve requirements, restart treasury bond purchases, etc., improving market liquidity.

These macro policies form market’s “safety cushion.” However, true excess returns come not from index beta but from precisely grasping three structural main lines: tech growth, Chinese enterprises going global, and high dividends plus cycles. These three directions will be key to 2026 investment success or failure.

Tech Growth: From Concept Hype to Performance Realization

Tech sector is undergoing profound change, with investment logic shifting from chasing vague “concepts” to verifying real “performance.” Artificial intelligence (AI) is core engine of this change. By 2026, AI technology expected to enter large-scale industrial application stage, with commercial value gradually realizing.

Brokers widely believe investment focus should gradually expand from upstream computing infrastructure to downstream application scenarios.

• AI Application Explosion: Guosen Securities recommends focusing on AI glasses, robots, intelligent driving and other terminal applications. CICC similarly bullish on robot, consumer electronics, and software application landing opportunities.
• Infrastructure Continues: AI infrastructure construction far from over. AI computing progress depends on chips, memory, network, and advanced packaging entire system improvements, bringing opportunities to full semiconductor chain.
• Business Model Reshaping: AI reshaping hardware, software, and telecom industry foundations. Expected by end of 2026, about 75% of companies will invest in Agentic AI (autonomous AI agents), greatly driving software-as-a-service (SaaS) platform spending growth.

NVIDIA CEO Jensen Huang once predicted that by 2030, data center operators may spend up to $4 trillion annually upgrading infrastructure to meet AI demand.

This tech wave driven by real industrial demand brings highly deterministic growth prospects for related companies. Investors should focus on those converting technological advantages into profitability – they will be one of core forces driving Shanghai stock index upward.

Chinese Enterprises Going Global: Opening Globalization Second Curve

“Going global” is no longer optional but core strategy for many excellent Chinese enterprises. By expanding business globally, these companies not only effectively hedge single market risks but open entirely new growth curves. This trend particularly prominent in multiple industries.

The following industries lead Chinese enterprises’ globalization wave:

• E-commerce
• Electric vehicles
• Photovoltaics and new energy
• High-tech hardware
• Branded consumer goods
• Environmental technology

Different from past simple product exports, new wave going global core is exporting technology, brands, and business models. For example, in electric vehicles and e-commerce, Chinese enterprises succeed globally with advantages in supply chain management, technological innovation, and user experience. For investors, identifying and investing in these globally competitive “going global pioneers” is important way to share China’s economic globalization dividends. Their overseas revenue will be key driver for valuation enhancement and contribute to stable growth of Shanghai stock index.

High Dividends and Cycles: Defense and Recovery Choices

In structural markets, portfolio configuration resilience is crucial. High-dividend strategies and cyclical recovery provide investors with offense-defense choices.

High-Dividend Assets are market’s “ballast stones.” In absolute returns funds dominant market pattern, companies with stable cash flow and high dividends highly favored. They not only provide defense in market oscillations but dividend returns also form deterministic income source. For investors seeking steady returns, allocating high-dividend assets is effective way to build portfolio safety cushion.

Cyclical Sectors contain recovery opportunities. With global economy gradually stabilizing, some cyclical sectors expected to welcome prosperity inflection.

• Energy Sector: AI data center construction surging power demand gradually driving natural gas and other energy demand growth. Fidelity analysts expect policy support for offshore oil/gas projects and pipeline construction to increase in coming years, benefiting oilfield service companies.
• Materials Sector: Fed rate cut expectations bring improvement space for materials stocks. Copper demand boosted strongly by renewable energy and AI data centers, while supply increasingly constrained, long-term fundamentals bullish. Silver also has upside due to industrial properties and value storage function.
• Mineral Resources: Taking Australian mining company Mineral Resources as example, its business portfolio shows cyclical investment logic. Though lithium prices short-term weak, global long-term demand remains strong; its mining services department provides stable cash flow, hedging commodity price fluctuation risks.

For Shanghai stock index, cyclical sector earnings recovery will provide upward elasticity. Investors can focus on leading companies optimizing cost structures and investing in future during industry troughs – they will show stronger earnings explosion in prosperity recovery.

Looking ahead to 2026, market main tone is clear. Whether “slow bull” or “recovery,” core features are earnings-driven and structural differentiation. Investors’ focus should shift from gaming Shanghai stock index to precise track and stock selection.

Core Investment Strategy Brokers widely recommend building balanced allocation. Strategy with “tech growth” and “Chinese enterprises going global” as core, supplemented by “high dividends + cyclical recovery” as satellite allocation to handle market structural characteristics.

However, investors must beware multiple risks. Global macroeconomic uncertainty, especially China-US relations fluctuations, pose external challenges. Meanwhile, if mainland China economy demand remains weak, policy support intensity below expectations, it may also impact market performance.

FAQ

Is 2026 A-Share “slow bull” or “structural recovery”?

The commonality of both characterizations is market oscillating upward. The difference is “slow bull” implies broad rise, “structural recovery” emphasizes opportunities concentrated in specific sectors. Market consensus leans toward the latter – index moderate rise but sharp internal differentiation, with investment key in choosing right directions.

What is the core driver pushing 2026 Shanghai stock index upward?

Earnings recovery is the most core driver for market. With mainland China macroeconomy stabilizing, corporate profitability continues improving. Multiple brokers predict non-financial enterprise earnings growth significantly rebounding, providing solid fundamental support for market – this is basis for judging market positive.

What are the most important investment main lines in 2026?

Brokers widely recommend focusing on three structural main lines. Investors can build balanced portfolio to handle market structural features.

• Core Allocation: Tech growth and Chinese enterprises going global
• Satellite Allocation: High-dividend defense and cyclical recovery

What main risks do investors need to note in 2026?

Investors must remain vigilant. Main risk points include global macroeconomic uncertainty, especially geopolitical fluctuations. Additionally, if mainland China policy support intensity below expectations or specific industry prosperity fluctuates, it may also challenge market performance.