Looking ahead to 2026, Fidelity expressed optimism about the prospects of China's stock market. Recent developments suggest a more predictable policy and external environment for businesses and investors. After a strong rebound in 2025, valuations of Chinese equities have largely normalized. As of October, the 12-month forward P/E ratio of the MSCI China Index stood at around 13x, still more than 40% lower than the S&P 500 Index.
Market performance has recently concentrated on high-beta and momentum-driven sectors such as technology and AI, with widening divergences among individual stocks creating investment opportunities where prices have disconnected from fundamentals.
Fidelity continues to focus on companies with stable earnings prospects, exposure to structural growth themes, and disciplined capital allocation. The firm believes these trends create a favorable environment for fundamental-driven investors to identify long-term opportunities.
Particularly promising sectors include advanced manufacturing, automation, and technology-driven industries, which align with policy priorities and offer increasing value over time. Despite short-term demand weakness, the consumer sector remains a key focus due to attractive valuations. High household savings, reduced debt levels, and stabilizing property markets are expected to gradually boost confidence and consumption.
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