Chinese stock market regains momentum! Fidelity International's latest statement

Today, Fidelity International Asia Economist Liu Peiqian shared China’s economic outlook for 2026, believing that fiscal policy may increase support for residents’ income in 2026, which could help boost domestic demand.

Liu Peiqian believes that the central bank will maintain a moderately easing stance, including a full-year policy rate cut of about 10 basis points and a reserve requirement ratio reduction of about 50 basis points, adopting a gradual policy approach to balance growth, exchange rates, employment, and bank net interest margins.

“Regarding A-shares returns, we can’t rely on valuation expansion like last year; this year, assessing corporate profitability growth is crucial.” Stuart Rumble, Head of Investment at Fidelity International Asia-Pacific, said that if profit growth can reach double digits, future investment returns will still be exciting, with opportunities in both industrial and consumer sectors.

“Supported by policy stability and sustained key growth drivers, the macroeconomic outlook for 2026 has become more balanced and resilient. It is expected that the dual-track growth pattern of weak domestic demand and strong exports will continue in China in 2026,” Liu Peiqian stated.

Liu Peiqian predicts that China’s GDP growth target for this year is likely around 4.5% to 5%, driven by manufacturing, diversified export markets, and resilient infrastructure investment. However, investors should pay more attention to nominal growth and evaluate corporate profitability carefully.

Under the premise of a controllable and stable macroeconomic foundation, recent policy signals supporting domestic demand have slightly increased the chance of inflation rising. In the short term, inflationary pressures may remain subdued, reflecting that current real growth mainly comes from the supply side. Notably, the external environment remains supportive, with the real estate market showing continued signs of stabilization, and the risk of significant economic slowdown appears limited.

Liu Peiqian believes that China’s fiscal deficit in 2026 will remain around 4%. Local government special bonds may slightly increase to support infrastructure spending. Although the details of fiscal measures are not yet finalized, increasing direct support to households could help boost domestic demand.

Regarding the stock market, Stuart Rumble, Head of Investment at Fidelity International Asia-Pacific, said that China’s stock market is regaining momentum. Policymakers continue to promote a policy framework centered on consumption support, real estate stabilization, and structural reforms, which supports liquidity and capital flows in A-shares and offshore Chinese markets. Risks such as weak real estate recovery, geopolitical uncertainties, and ongoing inflation pressures remain, but stable policy implementation and corporate profit growth are expected to attract more international investors.

He mentioned that consumption remains the core pillar of long-term growth. Although household spending sentiment is cautious in the short term, the fundamentals are gradually improving. As the real estate market stabilizes and employment prospects improve, consumer confidence is expected to rise, potentially releasing substantial savings and pent-up demand, reinforcing consumption as a key driver of sustainable growth. This presents opportunities for active investors to invest in leading consumer companies in the world’s second-largest economy at attractive valuations. Policies also continue to support the development of the service sector, encouraging health and experiential consumption, leading to industry differentiation. High-end services, healthcare, online platforms, leisure, and experiential retail are the new winners benefiting continuously.

Contrary to mainstream market views, Stuart Rumble believes that there are some investment opportunities in the consumer industry, with valuations already at rock bottom, and slight improvements could create good investment scenarios. Sportswear and tourism are promising, while the previously hot IP consumer concepts should be approached with caution.

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