Core Conclusions: ① In 2025, the A-share market exhibited clear characteristics of incremental capital inflows, with active funds such as leveraged capital and private fund capital becoming the primary market entrants. Insurance capital also entered the market in substantial volume, while active equity-focused public funds experienced overall net redemptions. ② The current market-entering funds likely originate mainly from high-net-worth individuals. As the risk appetite of the general public gradually recovers from low levels, ordinary household funds are expected to become the main force entering the market in 2026. ③ The macro and micro background of 2025 shares certain similarities with that of 2020, but the structure of incremental funds differs. Drawing lessons from history and anticipating the progression of household fund inflows, the full-year incremental funds for 2026 are projected to reach 2 trillion yuan.
Incremental Market Funds Expected to Exceed Two Trillion Yuan —— 2026 Bull Market Outlook Series 1 In our report "The Changes and Constants of the 2026 Bull Market - 20260103", we indicated that as the repair of fundamentals spreads from points to areas, coupled with further household fund inflows, the A-share bull market would progress into its later stages in 2026. Accordingly, we are conducting a series of in-depth studies focusing on the driving forces and key areas of attention for the 2026 bull market. This article is the first in the series, focusing specifically on one of the key drivers of the current A-share uptrend: micro-level fund flows.
Following the initiation of the bull market on September 24, 2024, investor confidence and risk appetite have continued to recover. In 2025, the赚钱效应 (money-making effect) of A-shares further intensified, with the Shanghai Composite Index surpassing 4000 points for the first time in over a decade. In retrospect, one of the key drivers behind the 2025 bull market was the continuous influx of investor funds at the micro level. Looking back at 2025, which types of funds actually propelled the market higher? Looking ahead to 2026, how much incremental capital can the A-share market expect? We will analyze these questions below.
1. Active Funds Were the Main Source of A-Share Incremental Capital in 2025 Looking back at 2025, A-shares overall performed remarkably well, with the Wind All-A Index accumulating a 28% gain for the year. Micro-level liquidity was a primary factor influencing A-share trends, and the impressive performance in 2025 was underpinned by ample fund support. Specifically examining the inflow节奏 (rhythm/timing) of incremental funds, the capital entering the market in 2025 can be divided into two stages.
In the first half of 2025, the market experienced volatile修复 (repair/recovery). With policy support and industrial catalysts, various funds entered the market from "multiple points" (showing diverse sources). In H1, influenced by events such as Trump taking office, the launch of the DeepSeek large model, and US "reciprocal tariffs," A-share market movements were highly volatile. Against this backdrop, all types of funds except active equity-focused public funds saw inflows. On one hand, breakthroughs in domestic AI applications revitalized market trading sentiment. In H1, funds representing retail investors, measured by bank-securities transfer balances,流入 (inflowed) 240 billion yuan, while foreign capital also saw阶段性 (phased)回流 (reflux/inflows) of approximately 100 billion yuan. On the other hand, guided by the policy "Implementation Plan for Promoting Medium- and Long-Term Capital Market Entry" issued early in 2025, insurance capital, which pursues long-term investment, saw substantial inflows. The growth rate of its equity asset scale was significantly higher than the market's rise, with inflows of about 420 billion yuan in H1. Additionally, ETF funds, which played a stabilizing role amid US tariff policy disruptions, also流入 (inflowed) about 80 billion yuan in H1.
From an industry perspective, incremental funds in H1 primarily flowed into the technology and dividend-yield (hongli) sectors. The leading sectors in H1 mainly included assets like banking and non-ferrous metals, as well as the technology sector benefiting from industrial trends. Based on measurable funds: For insurance capital,估算 (estimated) based on top ten shareholder data, the primary增配 (increased allocations) in H1 were to dividend sectors like banking (increasing the overweight position relative to the sector's free-float market cap by 1.8 percentage points), transportation (1.5 ppt), and communications (0.6 ppt). For passive funds,估算 based on ETF index component weights, the main inflows in H1 were into computers (21.6 billion yuan), defense (12.8 billion yuan), and banking (11.7 billion yuan). For foreign capital, based on changes in Northbound Connect holdings, the main inflows in H1 were into automotive (increasing the overweight position by 0.6 ppt), electronics (0.6 ppt), and banking (0.6 ppt).
Since Q3, the market has experienced放量拉升 (volume-backed rising), with the main incremental funds coming from active sources like private funds and margin trading. Since Q3, thematic events such as "anti-involution" policies, the start of construction on the Yajiang hydropower station, and the爆发 (explosion) of computing power demand effectively boosted market sentiment. Subsequently, events like the Fed's restart of interest rate cuts in September, important meetings, and progress in Sino-US trade talks further elevated risk appetite, leading to an acceleration in the rise of A-share indices. Against the backdrop of a significantly improved赚钱效应 (money-making effect), funds with higher risk appetite showed clear signs of entering the market. On one hand, leveraged funds entered the market substantially; by December 31st, A-share margin balance had exceeded 2.5 trillion yuan, reaching a historical high in late October, with about 700 billion yuan entering the market since July. On the other hand, by November, the scale of Chinese private securities investment funds had exceeded 7 trillion yuan, growing by about 1.5 trillion yuan since June. Meanwhile, the average仓位 (position) of the Sunshine Private Fund Long-Only Index also increased from 61% in June to a high of 66%. We estimate that private fund capital may have流入 (inflowed) significantly into the stock market in Q3, by about 400 billion yuan.
From an industry perspective, since Q3, incremental funds have mainly flowed into non-ferrous metals, electronics, and new energy sectors. Since Q3, boosted by "anti-involution" policies, non-ferrous metals and new energy performed well. Simultaneously, with the爆发 (explosion) of domestic and international computing power demand, electronics and communications also ranked among the top performers. The rise of these sectors was also离不开 (inseparable from) the continuous inflow of incremental funds. On one hand, looking at private funds: according to China Resources Trust, the材料 (materials) sector仓位 (position) of成分基金 (constituent funds) in the Sunshine Private Fund Long-Only Index has increased significantly since Q3, reaching 8% currently and entering the top three sectors with the highest allocations. Additionally, the仓位 for private capital goods (including manufacturing like new energy) has also increased noticeably. On the other hand, looking at leveraged funds: sectors such as electronics (margin balance grew by 167.9 billion yuan since July, as of Dec 31, similarly hereinafter), power equipment (95 billion yuan), communications (60.2 billion yuan), and non-ferrous metals (47.9 billion yuan) experienced relatively fast growth in margin balances.
In summary, since 2025, the A-share market overall has exhibited distinct characteristics of an增量资金市 (incremental funds market). Among the entrants, active funds like private funds and leveraged capital entered the market considerably, insurance capital also entered with substantial volume, foreign capital experienced阶段性回流 (phased reflux/inflows) in H1, while public fund flows showed some divergence, with active equity-focused public funds seeing net redemptions while passive funds and "fixed-income+" funds saw slight inflows.
2. The Process of Chinese Household Fund Market Entry is Still in its Early Stages As mentioned earlier, from a full-year 2025 perspective, active funds like leveraged capital and private funds became the main force entering the A-share market. This indicates that as the market's赚钱效应 (money-making effect) began to recover, the willingness of some funds with higher risk appetite to enter the market increased significantly, sparking discussion about the process of household fund market entry. Below we will analyze from this perspective.
Various signs indicate that some household funds are taking the lead in entering the market, likely originating mainly from high-net-worth individuals. After the bull market started on September 24, 2024, market pessimism was significantly reversed, and增量资金 (incremental funds) represented by active capital like retail speculators and leveraged funds entered the market in large quantities. In the bull market atmosphere since 2025, overall household risk appetite continued to回暖 (recover/warm up). According to the PBOC's Urban Depositor Survey, in 25Q3, 18.5% of depositors倾向于 (tended towards) investing more, an increase of 5 percentage points from the end of 2024. The proportion willing to invest in high-risk assets like stocks and fund trusts also rose. The修复 (recovery) of risk appetite plays an important role in promoting household fund market entry. Various signs indicate that household risk appetite was increasing in 2025. For example, the活化程度 (activation degree) of household deposits kept improving; the year-on-year growth rate of less liquid time deposits decreased from a high of 13.5% at the beginning of the year to a recent low of 10.7%, while the YoY growth rate of more liquid demand deposits持续上升 (continuously rose) from a low of 4.4% to a high of 8.9%. Furthermore, the high growth of non-bank financial institution deposits relative to household deposits might indicate that some Chinese household deposits are flowing into financial markets. Since June 2025, the rolling 3-month total increment of non-bank deposits has been higher than that of household deposits. In July alone, the increment in non-bank deposits reached 2.15 trillion yuan, the highest level for the同期 (same period) since records began in 2015.
However, the current entry of household funds into the market might still be partial, likely coming mainly from high-net-worth individuals. As mentioned before, the增量资金市 (incremental funds market) in the A-share market since 2025 has been concentrated in active funds like private and leveraged capital. These channels have certain investment thresholds for retail investors. Therefore, we believe the incremental funds in A-shares in 2025 probably came more from high-net-worth individuals. In fact, according to the "Wantong Insurance · Hurun Report 2025 China High-Net-Worth Individuals Financial Investment需求 (Demand) and Trends White Paper", due to the strong demand of high-net-worth individuals for asset保值增值 (preservation & appreciation) and wealth inheritance, they currently prioritize financial investment as their primary capital allocation direction (79%), which also corroborates the structure of incremental funds in the 2025 A-share market.
There is still significant room for Chinese household funds to enter the market, as the risk appetite of most residents remains at low levels. As mentioned earlier,伴随 (along with) the回暖 (recovery) of household risk appetite in 2025, the process of household fund market entry may have accelerated. However, the reality might be that the current incoming funds mainly come from some high-net-worth individuals with higher risk appetite, while the "main force" of household funds has not shown signals of large-scale entry. On one hand, according to Douyin stock search statistics from Juliang Suanshu, since the accelerated rise of A-shares in July 2025, the month-on-month growth rate of stock search share was only 19%, significantly lower than the over 100% search growth rate during previous bull markets. Behind this might be the fact that although the overall increase in A-shares during 25Q3 was considerable, there was no短期急涨 (short-term sharp rally), making it difficult to trigger a传播的“破圈效应” (communicative "breaking the circle effect"). We calculated the maximum 5-day rolling gain of the Wind All-A Index; the maximum value of this indicator since May 2025 was about 6%,明显低于 (significantly lower than) the 34% during the 9/24 period in 2024 and the 13% in July 2020. On the other hand, after the large banks cut deposit rates in May 2025, the substantial到期资金 (maturing funds) from time deposits at that time still tended to flow into low-risk products. In contrast, as of September, money market fund shares reached 14.7 trillion units, a year-on-year increase of 12.5%, while active equity-focused public funds continued to experience net redemptions, with about 210 billion yuan in net redemptions in Q3.
Most households still have不高 (not high) expectations for income and housing prices, and risk appetite operates at low levels, which might be the main factor constraining the comprehensive entry of household funds into the market in 2025. The slow increase in social media stock popularity and the fact that large amounts of household funds are still circulating in low-risk products might both stem from the fact that the risk appetite of most residents remains low. Risk appetite originates from expectations of income stability and wealth appreciation. According to the PBOC's Urban Depositor Survey, the future income confidence index for urban depositors was 45.9% in 25Q3. Although it increased slightly from 25Q2, it was still lower than the level at the end of 2023. Meanwhile, the proportion expecting future housing prices to decrease in 25Q3 reached 23.5%, higher than in 25Q2 and at a historical high. This shows that the general public's expectations for future income and wealth preservation might still not be high, thus keeping their willingness to invest in risky assets relatively low. In the long run, there is still significant room for household funds to enter the market.
3. 2026 Micro-Level Funds Expected to See Net Inflow of Two Trillion Yuan As mentioned earlier, the 2025 A-share market was a bull market driven by the entry of active funds, and we have also reviewed the size of the considerable incremental fund inflows. How can we comprehensively track the structure of A-share micro-level fund flows? We conduct a bottom-up summary calculation of various micro-level funds in A-shares from both inflow and outflow perspectives. Specifically:
① Funds flowing into the stock market mainly come from 5 sources: Retail investor funds (estimated using client transaction settlement fund balances), Leveraged funds (only counting on-exchange margin financing balances), Domestic institutional funds (including funds, insurance, social security, etc. Among these, public fund flows are estimated using fund shares, NAV, and A-share allocation ratios, while private fund, asset management, and insurance fund flows are represented by the change in estimated shareholding value excluding price fluctuations), Foreign capital (estimated using quarterly disclosed Northbound Connect shareholding details), Dividends and buybacks (only calculating the portion for secondary market investors excluding major shareholders).
② Funds flowing out of the stock market mainly go to 3 destinations: Equity financing (for additional issuances, only considering the scale of cash subscriptions and deducting the proportion subscribed by major shareholders), Net reduction in holdings by industrial capital (calculated manually based on secondary market transaction details of company shareholders), Transaction taxes and fees (financing costs, stamp duty, and other transaction fees).
The overall fund inflow situation in 2025 was similar to that in 2020, but the structure of incremental funds showed new changes. The macro environment and market characteristics of 2025 were quite similar to those of 2020. On one hand, from a market characteristic perspective, A-shares experienced significant volatility early in both 2020 and 2025 due to extreme external event shocks, subsequently stabilizing and rebounding in a positive macro-policy environment. The Wind All-A Index rose 26% for the full year 2020, and 28% in 2025. On the other hand, from a macro and industrial environment perspective, both 2020 and 2025 were during Fed rate-cutting cycles, with relatively宽松 (loose/accommodative) macro liquidity environments. Additionally, the新能源 (new energy) industry爆发 (explosion) in 2020 and the AI wave in 2025 indicate that both periods were in phases of accelerating industrial transformation. Corresponding to the similar market characteristics and macro-industrial environment, and based on our aforementioned fund flow calculations, the overall net fund inflows in 2020 and 2025 were also大致相同 (roughly similar). Full-year 2020 saw net inflows of about 2 trillion yuan, and as of Dec 31, full-year 2025 is estimated to have seen net inflows of about 1.9 trillion yuan. However, the difference lies in the significant disparity in the structure of incremental funds between 2020 and 2025. The main incremental funds in 2020 came from households entering through active equity funds, whereas 2025 relied mainly on leveraged funds, private funds, and insurance capital to drive the market. This difference is likely related to the currently low household risk appetite mentioned earlier.
Looking ahead to 2026,伴随 (along with) the progression of household fund market entry, full-year incremental funds are projected to reach 2 trillion yuan. As mentioned earlier, from the perspectives of macro-industrial environment, market characteristics, and fund inflows, 2025 and 2020 were quite similar, but the structure of incremental funds has undergone new changes. Drawing on the historical experience of 2020-21, and incorporating the new changes observed in 2025, we project that full-year incremental funds for 2026 could reach 2 trillion yuan. Specifically:
From the perspective of inflow items, active retail funds are expected to enter the market further, insurance capital and dividend scales are likely to continue high growth, while public fund and foreign capital flows may improve. First, regarding household-side funds: According to the Hurun Group's "2025 China High-Net-Worth Individuals Quality of Life Report", a relatively high proportion of high-net-worth individuals plan to increase investments in A-shares and funds in 2026. From a short-term perspective, household risk appetite is still expected to continue recovering. Furthermore, after the pandemic, precautionary savings increased. We estimate based on the ratio of household deposits to GDP (TTM) that by 25Q3, household超额存款 (excess deposits) might be接近 (close to) 30 trillion yuan. From a long-term perspective, there is still significant room for household market entry. We project that active retail funds could further enter the market in 2026, with the combined scale of margin financing and bank-securities transfers potentially reaching 1000 billion yuan.
Second, regarding institutional-side funds: On one hand, benefiting from the growth of insurance premium income and policy boosts from new accounting standards for insurers, insurance capital entry has expanded rapidly in recent years. We believe that against the backdrop of policy support, dividend assets still hold allocation value for insurance capital. Insurance capital inflows in 2026 may continue their high growth,预计 (projected) at 700 billion yuan for the full year. On the other hand, in 2021, both foreign capital and active public funds improved compared to 2020, driven by improved market赚钱效应 (money-making effect) and recovering fundamental expectations. Drawing on historical experience, 2026 may also hold promise in this regard. Simultaneously, the trend towards passive investing since 2023 is likely to continue in 2026. Full-year inflows from active equity + passive equity + "fixed-income+" funds are预计 (projected) to be about 700 billion yuan, with foreign capital inflows of about 100 billion yuan.
Finally, the new "National Nine Articles" in April 2024 further strengthened supervision of cash dividends from listed companies. Additionally, the CSRC issued a document in November 2024 encouraging "increasing dividend frequency, optimizing dividend节奏 (rhythm/timing), and reasonably raising dividend payout ratios." Under policy guidance, the willingness of A-share listed companies to pay dividends has trended upwards in recent years. The overall A-share dividend payout ratio in 2025已接近 (has already approached) 50%. Assuming overall gentle修复 (recovery) in corporate micro-level profits in 2026, the full-year A-share dividend scale may continue its high growth,预计 (projected) to inflow about 950 billion yuan.
From the perspective of outflow items,伴随 (along with) the回暖 (recovery) of market sentiment, financing and reduction scales may expand. Drawing on the historical experience of 20-21, A-share financing scales and net reduction scales by industrial capital often expand rapidly alongside improving market conditions. Although market sentiment had明显修复 (significantly recovered) in 2025 and the赚钱效应 (money-making effect) had marginally improved, financing and reduction scales were still at relatively low levels. Looking ahead to 2026,伴随 (along with) the回暖 (recovery) of market risk appetite and the continuous improvement of capital market system construction, the A-share investment and financing environment is expected to持续修复 (continue recovering), and the financing environment may marginally turn more active. Full-year IPO scale is预计 (projected) at 200 billion yuan,再融资 (refinancing) scale at 550 billion yuan, and industrial capital reduction at 550 billion yuan. Additionally, regarding stock market-related taxes and fees: the expected scale of transaction taxes and fees is converted based on the predicted value of 2026 market turnover; margin trading fees are generated from leveraged funds. We expect market trading sentiment to remain high in 2026, with full-year stamp duty + margin trading fees amounting to about 700 billion yuan.
Risk提示 (Prompt): Most fund flow data are approximate estimates and may differ from the actual situation; predictions for some data are based on overall market研判 (analysis/judgment) views and may change due to future market developments.
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