The Shanghai Composite Index has indeed surged to a 10-year high, closing around 3,728 points, a level last seen in August 2015 . This rally has been fueled by strong buying momentum from both institutional and retail investors, as bond yields remain low and deposit rates have declined .

Despite this impressive uptick, investor sentiment—as reflected by WeChat Index searches for "bull market"—appears to be only just beginning to recover, lagging noticeably behind levels seen after the market surge of September 2024 (specifically following the stimulus wave around September 24) . In short, while the market is technically bullish, social sentiment has not yet fully caught up.

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Chinese Market Outlook: Is It Time to Buy?

Macro and Sentiment Landscape

Policy Support & Government Anchoring: Analysts suggest the current rally is underpinned by renewed policy backing, a stream of new growth catalysts (notably in high-tech sectors), and broader capital market inflows. This provides a more sustainable base than past speculative rallies .

Selective Bullish Momentum: As per J.P. Morgan, recent gains—especially in AI-related equities—are selective rather than broad-based, signaling caution against assuming across-the-board strength .

Institutional Confidence: Investment firms such as Citigroup and Goldman Sachs are affirming a constructive stance—Goldman Sachs, in particular, remains optimistic that this rebound is substantial and decreasingly liquidity-driven .

Valuation and Composition

Undervaluation vs. Recovery: Chinese equities, especially state-owned enterprises (SOEs) trading below book value, remain attractive. These are seen as "safe plays" in a supportive policy environment .

Historical Perspective: Over the past decade, the Shanghai Composite has been largely range-bound, with wild swings and several speculative bursts. Now, prices are improving but remain below the 2015 record highs (~5,166) and the 2007 peak .

MSCI China Momentum: The MSCI China Index has already entered a "technical bull market," with over 20% year-to-date gains. But the rally has been driven primarily by a narrow slice of internet and AI names .

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To Buy or Not: Strategic Considerations

Investment Horizon Strategic Viewpoint

Long-Term Investor (Value-Oriented) Cautiously Bullish – This moment offers access to undervalued Chinese equities—especially SOEs and key tech sectors—on supportive policy momentum and structural recovery. However, a selective approach remains critical.

Medium-Term or Tactical Trader Neutral to Cautious – While markets have rallied, sentiment remains moderate, and valuation compression suggests limited room for broad upside. Waiting for deeper evidence of economic rebound (e.g., consumption recovery) or dips may offer better entry.

Retail Investor Wait Patiently – Considering social sentiment is still nascent, FOMO-driven flows may introduce volatility. Better to monitor structural signals before jumping in.

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Summary Conclusion

While the Shanghai Composite’s 10-year high is academically bullish, behavioral sentiment remains cautious. Rational investors may view the current juncture as a disciplined entry point, particularly into sectors supported by policy and value dynamics.

If you hold Chinese assets:

Consider overweighting selective sectors (SOEs under PB < 1, AI, infrastructure, emerging consumption).

Monitor economic cues (consumption trends, trade data, policy updates) to guide positioning.

Avoid broad-based buying; prioritize quality and fundamentals.

If you're considering deploying new capital:

A staggered or phased approach may be prudent.

Use macro data to validate durability beyond short-term momentum.

Employ hedges or structured products if looking to balance risk.