International investment banks including UBS Group and Citigroup have recently released fresh market assessments, turning their collective attention toward China's stock market. Institutions broadly agree that the appeal of A-share valuations is emerging, and that a window for allocation may already be open.
Favorable Views on A-share Allocation Value
UBS Group said in a research report released recently that Asia-Pacific stock markets have seen a notable pullback, with multiple technical indicators having already touched historic lows. In UBS's view, earlier defensive positions and short trades have already delivered considerable returns, but crowding in those trades has risen markedly, making it no longer appropriate to stay broadly bearish and cling to defensive strategies, as the market's risk-reward ratio is gradually tilting toward buying on dips. Unlike UBS Group, which focuses on technicals, Citigroup approaches the issue more from a valuation perspective. Citigroup said in its latest report that valuations in China's internet sector remain attractive. Backed by the resilience of core business earnings and healthy balance sheets, leading Chinese internet companies are able to weather recent market volatility and capture long-term value amid an evolving artificial intelligence cycle. It is worth noting that while both institutions turned bullish, they also offered sober risk warnings. Cross-asset factors such as oil price swings, European debt spreads and sovereign yields continue to unsettle global markets, and the related risks have not been fully eliminated, so it is not advisable to raise overall risk appetite at this stage.
Multiple Supports Underpin Long-term Value
In fact, behind the密集 bullish calls from international investment banks is a market re-examination of A-shares' own fundamentals. Although short-term sentiment is weak and the index has pulled back noticeably, the underlying logic supporting the market's medium- and long-term operation has not been broken. First, the corporate earnings foundation is resilient. Taking the semiconductor industry that UBS Group highlighted as an example, leading companies have solid profitability in their core businesses and relatively healthy balance sheets, giving them the ability to withstand risk and ride through cycles even amid market volatility, while also seizing opportunities from a new round of industrial transformation such as artificial intelligence and tapping long-term growth value. Wind data show that as of now, 13 A-share companies in the semiconductor supply chain have disclosed earnings forecasts for the first three quarters of 2026, of which 11 issued positive forecasts (including 10 with expected increases and 1 that turned a loss into a profit). Second, after sufficient valuation correction, the risk-return ratio has improved. Technical indicators for core indices such as the CSI 300 have entered historically oversold territory, and the sustained price adjustment has already digested a large amount of pessimistic expectations, bringing the index back to key moving-average support levels. Compared with earlier periods, some high-quality sectors and individual stocks have shown allocation value, creating conditions for medium- and long-term capital to enter. Xiao Jian, vice general manager of Dacheng Fund, told a reporter that in a horizontal comparison, A-shares stand out for their valuation cost-effectiveness. Currently, the price-earnings ratio of the CSI 300 Index is about 13.1 times, while the S&P 500 Index was about 25.3 times over the same period, meaning the valuation of A-share core assets is only about half that of U.S. stocks. Moreover, A-shares currently have faster earnings growth and quicker industrial upgrading, combining low valuation with high growth, which is relatively rare among major global economies. In a vertical comparison, A-share valuations are in a reasonably low range. The price-earnings percentiles of major broad-based indices currently sit in a reasonable range, with the ChiNext Index's price-earnings ratio at only about the 25th percentile of the past 10 years, a relatively low historical level that leaves limited room for further downside. Finally, the overall direction of domestic industrial growth and the policy environment has not changed. Whether in the digital economy, the internet platform economy, or high-end semiconductor manufacturing, the long-term development direction of the relevant industries is clear. At the same time, regulators continue to deepen capital market reform, push to improve the quality of listed companies and guide medium- and long-term capital into the market, providing institutional support for the long-term health of the market ecosystem. Overall, this round of comments from international investment banks recognizes both the allocation window after Chinese assets' excessive decline and the fact that external volatility will still bring repeated fluctuations. This is both a positive response to A-shares' solid foundation and a cautious reminder to market participants. The market will eventually return to fundamentals, and those high-quality assets that have withstood the test of adjustment and possess genuine profitability are expected to be the first to win value re-rating in the period ahead.
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