On November 28, the 2025 Analyst Conference was held, bringing together experts, scholars, heads of brokerages, funds, and private equity firms, as well as chief analysts to explore investment strategies for navigating market cycles. Liu Chenming, a strategy analyst at Tianfeng Securities Co.,Ltd., delivered a speech on the fundamentals of the A-share market.
Liu pointed out that after nearly two years of valuation expansion, corporate earnings fundamentals will be crucial next year. He emphasized that the profit analysis framework for A-shares is undergoing significant changes, requiring greater attention to overseas revenue and emerging industries.
Liu first highlighted a "hard-won" positive signal: Against the backdrop of declining ROE in traditional domestic demand sectors, the overall ROE of A-shares has stabilized and rebounded for three consecutive quarters after 16 quarters of decline. He believes this marks a critical improvement in fundamentals.
He further noted that traditional profit analysis frameworks primarily rely on domestic credit, fiscal policies, social financing, and real estate data. However, the structural changes in A-shares now necessitate adjustments to the analytical perspective. Liu shared three key data points:
1. The proportion of overseas revenue for A-share companies has risen from about 10% a decade ago to 20% currently. 2. The profitability of overseas operations has significantly improved, with gross margins increasing from 17%-18% (on par with domestic operations a decade ago) to 20%, while domestic operation margins have fallen to 15%. 3. The share of traditional industries in profit structures has declined from 70%-80% ten years ago to about 50%-60%.
"This means our strategic analysis framework, including the profit assessment model, requires significant adjustments. We now need to focus more on overseas segments and emerging industries," Liu concluded.
Based on these changes, Liu provided an outlook for next year's earnings fundamentals. He believes that with slowing declines in domestic PPI (Producer Price Index), combined with overseas fiscal expansion, low inventory restocking cycles, and the U.S. political cycle, A-share ROE—after three consecutive quarters of recovery—is expected to continue stabilizing and rebounding next year. "This forms the strongest foundation and support for the continuation of next year's bull market," he stated.
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