Chinese stock market regains momentum! Fidelity International's latest statement

Today, Fidelity International Asia Economist Liu Peiqian shared his outlook for China’s economy in 2026, believing that fiscal policy may increase support for household income in 2026, which could help boost domestic demand.

Liu Peiqian believes that the central bank will maintain a moderately easing stance, including a full-year policy rate cut of about 10 basis points and a reserve requirement ratio reduction of approximately 50 basis points, adopting a gradual policy approach to balance growth, exchange rates, employment, and bank net interest margins.

“Regarding A-shares returns, we can’t rely on valuation expansion as we did in the past year. This year, assessing corporate profitability growth is crucial.” Stuart Rumble, Head of Investment at Fidelity International Asia-Pacific, said that if profit growth can reach double digits, future investment returns will still be exciting, with opportunities in both industrial and consumer sectors.

“Benefiting from policy stability and sustained key growth drivers, the macroeconomic outlook for 2026 has become more balanced and resilient. It is expected that the dual-track growth pattern of weak domestic demand and strong exports will continue in China in 2026,” Liu Peiqian stated.

Liu Peiqian predicts that China’s GDP growth target for this year is likely around 4.5% to 5%, driven by manufacturing, diversified export markets, and resilient infrastructure investment. However, investors should pay more attention to nominal growth and assess corporate profitability carefully.

Under the premise of a controllable and stable macroeconomic foundation, recent policy signals supporting domestic demand have slightly increased the chance of inflation rising. In the short term, inflationary pressures may remain subdued, reflecting that current real growth mainly comes from the supply side. Notably, the external environment remains supportive, with continued signs of stabilization in the real estate market, and limited risks of significant economic slowdown.

Liu Peiqian believes that the fiscal deficit in 2026 will remain around 4%. Local government special bonds may be slightly increased to support infrastructure spending. Although fiscal policy details are yet to be finalized, increasing direct support to households would help boost domestic demand.

Regarding the stock market, Stuart Rumble, Head of Investment at Fidelity International Asia-Pacific, said that China’s stock market is re-energizing. Policymakers continue to promote a policy framework centered on consumption support, real estate stabilization, and structural reforms, which supports liquidity and capital flows in A-shares and offshore Chinese markets. Risks such as weak real estate recovery, geopolitical uncertainties, and ongoing inflationary pressures remain. However, stable policy implementation and corporate profit growth are expected to attract more international investors.

He mentioned that consumption remains the core pillar of long-term growth. Although household spending sentiment is still cautious in the short term, the fundamentals are gradually improving. As the real estate market stabilizes and employment prospects improve, consumer confidence is expected to rise accordingly, potentially releasing significant savings and pent-up demand, reinforcing consumption as an important driver of sustainable growth. This presents opportunities for active investors to invest in leading consumer companies in the world’s second-largest economy at attractive valuations. Policies also continue to support the development of the service industry, encouraging health and experiential consumption, leading to industry segmentation. High-end services, healthcare, online platforms, leisure, and experiential retail are the new winners that continue to benefit.

Contrary to mainstream market views, Stuart Rumble believes that there are some investment opportunities in the consumer industry. Valuations have already bottomed out, and slight improvements could create good investment scenarios. Sportswear and tourism are promising, while the previously hot IP consumption concepts should be approached with caution.