For stock investors, authoritative, professional, timely and comprehensive analyst research reports can help uncover potential thematic opportunities. The following discussion, drawn from CICC's research perspectives, examines where valuations have fallen to after the recent market pullback.
In the second half of this year, China's capital markets experienced a relatively large correction. The CSI 300, ChiNext Index, Hang Seng Index and Hang Seng Tech Index have each fallen 20.2%, 41.1%, 18.9% and 35.8% respectively from their year-to-date highs, with year-to-date returns all turning negative. Some leading companies have already corrected back to levels close to those seen around the "924" policy pivot. In our view, after this pronounced adjustment, overall A-share valuations have fallen below their historical averages, and both cross-market and historical comparisons suggest that investment appeal has improved meaningfully.
A-share market overall valuations have dropped below historical averages. At last week's low point, the CSI 300 equity risk premium had risen above one standard deviation above the historical mean, a level that has historically corresponded to multiple low points for the A-share market. Based on Wind data as of October 23, 1) for the A-share market, the CSI 300 forward price-to-earnings ratio was 11.9x and the forward price-to-book ratio was 1.1x, below the past decade's historical averages of 12.1x and 1.2x, and down 19.0% and 15.5% from their year-to-date highs of 14.7x and 1.3x. The CSI 300 equity risk premium was 6.2%, having risen to more than one standard deviation above the historical average. Historical experience shows that when this indicator rises to this position, it has often corresponded to low phases in the A-share market; 2) for the Hong Kong market, the MSCI China ex-A-share index had a forward P/E of 8.2x and a forward P/B of 0.8x, around one standard deviation and 1.1 standard deviations below the historical average, respectively. The Hang Seng Index's forward P/E and forward P/B were 10.5x and 1.2x, below their historical averages; Hang Seng Tech's forward P/E and forward P/B were 18.7x and 1.8x, at 0.9 and 1.1 standard deviations below the historical average.
The ChiNext Index P/E has reached a relatively extreme historical position. At its low, it briefly approached the level seen around the "924" policy pivot in 2024. Many heavyweight companies in the ChiNext Index are in a period of strong business momentum. After the pronounced correction, the index's forward P/E is now 22.9x, 1.2 standard deviations below the historical average and at the 4.7th percentile over the past decade. Its equity risk premium is 1.6%, 1.7 standard deviations above the past decade's historical average. Both are close to the levels seen around the "924" policy pivot, placing them at relatively extreme historical levels.
Small-cap valuations relative to large caps have fallen back, and the earlier localized overvaluation of small caps has eased noticeably. In the middle of this year, structural overvaluation briefly appeared in the A-share market, with small-cap valuations on the high side. However, as the market adjusted recently, small-cap valuations relative to large caps have retreated somewhat. The CSI 1000/CSI 300 trailing P/E ratio fell from a year-to-date high of 3.9 to 3.0, while the LF P/B ratio fell from 2.0 to 1.6; the CSI 500/CSI 300 trailing P/E ratio fell from a year-to-date high of 2.9 to 2.3, while the LF P/B ratio fell from 1.9 to 1.6.
Valuations in most industries are now below historical averages. The trailing P/E of most industries has already fallen below the historical average. Among them, sectors such as non-bank financials, non-ferrous metals, food and beverage, power equipment, beauty and personal care, and media have P/E valuations below the 25th percentile since 2010. Industries whose current P/E still exceeds the historical average include agriculture, forestry, animal husbandry and fishery, building materials, computers, automobiles, machinery and equipment, and coal.
Cross-asset comparison: the relative appeal of equities versus bonds has risen to a relatively high historical level. The current 10-year government bond yield is 1.6%, at a historical low, while A-share dividend yields have rebounded somewhat amid capital market development and the market correction. Based on dividend yields and government bond yields, the equity-bond relative appeal index currently stands at 184%, above the 90th percentile of the past five years, placing the relative cost-effectiveness of equity assets at a historically high level.
International comparison: overall A-share valuations are clearly low among major global markets, offering relatively good investment appeal. The CSI 300 forward P/E is currently about 11.9x, while the Hong Kong Hang Seng Index valuation is 10.5x. According to Bloomberg data, these are clearly below major global markets such as the United States (S&P 500, 21.0x), Japan (Nikkei 225, 20.3x), India (SENSEX 30, 17.8x) and Europe (Stoxx 600, 13.8x). Current A-share valuations reflect that the market may already be at an oversold or overly pessimistic level.
The A-share market has been volatile recently, with overall valuations declining again and trading volume shrinking relatively quickly. In our October 15 note, we pointed out that with external disturbances and funding pressures overlapping, the short-term market is waiting for positive signals, while domestic fundamentals and medium-term logic have not changed, and the A-share market is still expected to extend its long-term, steady progress trend. Last week's Financial Street Forum annual meeting, with its arrangements around market stabilization mechanisms, investment-side reform and liquidity support, sent positive policy signals to the market, which should help gradually stabilize market expectations and boost investor confidence. Overall A-share valuations are already at historically low levels, especially with some technology areas seeing valuations return to relatively extreme historical lows, significantly enhancing their medium-term investment appeal. At present, the logic supporting A-shares from the global monetary order reconstruction and the technology narrative has not changed, so there is no need to be overly pessimistic.
On allocation, return to a "barbell structure." In our October 12 note, we argued that in an environment of limited aggregate growth elasticity, coexisting structural high prosperity and greater swings in market risk appetite, a "technology plus dividend" barbell structure is expected to become an allocation choice that balances earnings growth elasticity, shareholder cash returns and portfolio stability. Recently, focus on two main lines: 1) areas where third-quarter earnings growth improves sequentially: for example, some upstream non-ferrous metals, and technology hardware benefiting from strong AI momentum and overseas demand. 2) High-dividend assets: domestic long-end interest rates are at historical lows, listed companies are broadly maintaining dividend yields and dividend scale, the relative appeal of equities versus bonds is rising, and high-dividend sectors have once again become an important choice for capital allocation.
Chart 1: Global stock market valuation levels. Note: Data as of October 23, 2026. Source: Bloomberg, Wind, CICC Research Department.
Chart 2: Year-to-date performance of major global assets. Note: Data as of October 23, 2026. Source: Wind, CICC Research Department.
Chart 3: A-share industry trailing P/E ranges (2005 to present). Note: Data as of October 23, 2026. Source: Wind, CICC Research Department.
Chart 4: CSI 300 equity risk premium rises to around one standard deviation above the average since 2010. Note: Data as of October 23, 2026. Source: Wind, CICC Research Department.
Chart 5: ChiNext Index equity risk premium is 1.7 standard deviations above the historical average. Note: Data as of October 23, 2026. Source: Wind, CICC Research Department.
Chart 6: A-share market performance, turnover and valuation. Note: Data as of October 23, 2026. Source: Wind, CICC Research Department.
Chart 7: Current A-share valuation distribution. Note: Data as of October 23, 2026. Source: Wind, CICC Research Department.
Chart 8: Equity-bond relative appeal based on dividend yields and government bond yields. Note: Data as of October 23, 2026; the equity-bond ratio is derived by comparing the CSI 300 dividend yield with the China 10-year government bond yield. Source: Wind, CICC Research Department.
Chart 9: CSI 300 non-financial forward P/E below the historical average... Note: Data as of October 23, 2026. Source: Wind, Go-Goal, CICC Research Department.
Chart 10: ...and the P/B ratio is also below the historical average. Note: Data as of October 23, 2026. Source: Wind, Go-Goal, CICC Research Department.
Chart 11: ChiNext Index forward P/E at a historical low. Note: Data as of October 23, 2026. Source: Wind, Go-Goal, CICC Research Department.
Chart 12: ChiNext Index forward P/B. Note: Data as of October 23, 2026. Source: Wind, Go-Goal, CICC Research Department.
Chart 13: P/E ratios across A-share styles decline... Note: Data as of October 23, 2026. Source: Wind, Go-Goal, CICC Research Department.
Chart 14: ...and the same is true for P/B ratios. Note: Data as of October 23, 2026. Source: Wind, Go-Goal, CICC Research Department.
Chart 15: Valuation comparison between small and mid-cap and large-cap blue chips (P/E). Note: Data as of October 23, 2026. Source: Wind, Go-Goal, CICC Research Department.
Chart 16: Valuation comparison between small and mid-cap and large-cap blue chips (P/B). Note: Data as of October 23, 2026. Source: Wind, Go-Goal, CICC Research Department.
Chart 17: International valuation comparison shows that the current overall P/E valuation level of the Chinese market is relatively attractive compared with developed markets such as the United States and Japan... Note: Data as of October 23, 2026. Source: FactSet, CICC Research Department.
Chart 18: ...and the same is true for P/B ratios. Note: Data as of October 23, 2026. Source: FactSet, CICC Research Department.
Chart 19: Most Hong Kong industries are at relatively low levels within their historical ranges. Note: Data as of October 23, 2026. Source: FactSet, CICC Research Department.
Chart 20: Overseas Chinese equity P/E is at a historical low... Note: Data as of October 23, 2026. Source: FactSet, CICC Research Department.
Chart 21: ...and overseas Chinese equity P/B is also below the historical average. Note: Data as of October 23, 2026. Source: FactSet, CICC Research Department.
Chart 22: Hang Seng Index P/E. Note: Data as of October 23, 2026. Source: Bloomberg, CICC Research Department.
Chart 23: Hang Seng Index P/B. Note: Data as of October 23, 2026. Source: Bloomberg, CICC Research Department.
Chart 24: Hang Seng Tech P/E. Note: Data as of October 23, 2026. Source: Bloomberg, CICC Research Department.
Chart 25: Hang Seng Tech P/B. Note: Data as of October 23, 2026. Source: Bloomberg, CICC Research Department.
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