This year, amid relatively stable macroeconomic and liquidity conditions, changes in institutional liability behavior have emerged as the primary driver of trends and structural shifts in the equity market.
We believe that shifts in institutional liability behavior are more fundamental than the capital flow phenomena reflected in institutional trading activities.
Looking back, the market's shift toward tech stocks with solid earnings and outflows from interest rate-sensitive assets like ultra-long bonds signal a reversal of the long-standing "flight to risk-free assets" trend.
The rising proportion of dividend-paying insurance products, the growth of multi-asset fixed-income wealth management products, and the rollover of fixed deposits reflect liability-driven changes that indirectly influence long-term institutional behavior.
We remain bullish on the current bull market, with our optimism rooted in liability-driven reallocation of institutional funds toward equities.
If 2022-2024 marked a cycle where capital flowed out of stocks into "low-risk assets" such as fixed deposits, bonds, dividends, and gold, 2025 represents a turning point as the pendulum swings back toward equities.
Our continued emphasis on insurers increasing equity allocations this year is just one example. Looking ahead to next year, liability-driven forces will persist and gain further momentum.
To assess the sustainability of this bull market from a liability-driven perspective, two key questions must be addressed: First, how much capital has flowed into equities this year? Second, how strong will liability-driven forces be in 2026?
In 2025, the stock market has already recorded a net inflow of 2.26 trillion yuan.
In the first three quarters, insurance funds contributed approximately 1.44 trillion yuan (net inflow of 1.1 trillion yuan after excluding market value growth). Wealth management products saw outflows of 108 billion yuan, while pension funds added 418.1 billion yuan. Fixed-income-plus strategies brought in around 150 billion yuan, private quant funds allocated an incremental 343.1 billion yuan, and foreign capital inflows totaled about 357.8 billion yuan—aggregating to roughly 2.26 trillion yuan.
2026 Projections: Insurance, Wealth Management, and Pension Funds to Drive Incremental Flows Institutional inflows into equities are expected to reach 3.1 trillion yuan in 2026, with fixed-income-plus public fund assets likely doubling from this year's levels.
1) Insurance: Portfolio calculations suggest equity allocations need to rise by 4.96%. Insurers are projected to contribute incremental funds of about 1.5 trillion yuan in 2026 and 1.7 trillion yuan in 2027. A previous report noted that insurers would need to raise equity allocations to 18.31% to balance returns between stocks and bonds.
2) Wealth Management: Fixed deposits maturing in 2025-2026 will total 142 trillion yuan, but renewals will face interest rates less than half of previous levels. While risk-averse depositors may not shift en masse, yield-sensitive clients are expected to reinvest in equity-linked products (wealth management, fixed-income-plus funds). Assuming equity allocations in wealth management gradually rise to 4% and 6%, incremental equity market inflows could reach 905.1 billion yuan in 2026 and 1.3567 trillion yuan in 2027.
3) Pension Funds: Long-term investment and absolute return mandates will drive pension funds to become a new source of equity market liquidity, with projected inflows of 678.8 billion yuan in 2026 and 801 billion yuan in 2027.
4) If fixed-income-plus strategies maintain high growth in 2026, total assets could double to 3.6099 trillion yuan.
Risk Warnings: A sharp rise in bond yields disrupting stock-bond rebalancing, unexpected volatility in tech sector trends, unforeseen downturns in traditional economic factors, and delayed information updates.
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