Gf Securities: 2026 Likely to Be an Enhanced Version of 2025, with Greater Expectations for Household Deposit Shifts and Foreign Capital Inflows

Deep News12-21 19:31

The best narrative for A-share incremental capital in 2025 has been the "asymmetry between upside potential and downside risks"—regulatory and insurance capital measures have curbed downside risks, while domestic deposit shifts and overseas dollar spillover funds have opened upside potential. However, in reality, downside risks remained limited (backed by insurance and regulatory support), while inflows from external capital were still in the early stages of risk appetite recovery (existing capital increased positions, but household and foreign inflows remained slow).

Looking ahead to 2026, the market is expected to resemble an enhanced version of 2025—insurance and regulatory support will likely continue, while household deposit shifts (especially among mid-to-high-net-worth individuals) and foreign capital inflows are anticipated to gain momentum.

**Key Drivers for Household Capital Inflows:** 1. **Reduced Market Volatility:** Insurance and regulatory backstops have lowered index volatility, creating favorable conditions for deposit shifts. 2. **Easing Balance Sheet Pressures:** Household debt repayment has slowed with mortgage rate cuts, and investment sentiment is recovering from its 2024Q3 trough. 3. **Higher Liquidity Preference:** Household deposits are expected to become more liquid in 2026, with an estimated ¥12 trillion in movable deposits. 4. **Improved Equity Attractiveness:** Declining yields in real estate, bonds, and fixed-income products have indirectly enhanced the appeal of equities.

Mid-to-high-net-worth households are leading the deposit shift, with private securities fund filings reaching ¥386 billion in the first 10 months of 2025, nearing 2021 levels.

**Foreign Capital Inflows:** 1. **Global Liquidity Expansion:** A weaker USD is expected to boost demand for non-USD assets. 2. **A-Share Fundamentals Recovery:** With earnings at an inflection point, 2026 could see improved fundamentals, attracting more foreign capital.

**Risks:** Geopolitical tensions, slower-than-expected liquidity easing, and subdued policy support for growth.

**Market Performance Highlights:** - **Sector Movements:** Communications, defense, and electronics led gains, while coal, petrochemicals, and steel lagged. - **Valuations:** Overall A-share P/E (TTM) dipped to 19.07x, with sectors like oil, utilities, and consumer staples below historical medians. - **Liquidity:** PBOC net withdrew ¥109 billion via open market operations.

**Upcoming Data Releases:** - China’s November CPI (Dec 22) - US Q3 GDP and core PCE (Dec 23) - Eurozone CPI (Dec 24) - Japan’s unemployment rate (Dec 26)

**Outlook:** Continued regulatory support and improving fundamentals position 2026 for stronger capital inflows, though risks remain from geopolitics and policy delays.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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