Summary of the Conference Call Transcript Industry and Company Overview - The transcript focuses on the **China equity market** outlook for 2026, specifically discussing the **MSCI China** and **CSI300** indices. Core Insights and Arguments 1. **Market Forecast**: The MSCI China and CSI300 indices are expected to appreciate by **20%** and **12%** respectively in 2026, following a **20%-30%** gain in the previous year primarily due to multiple expansions [3][4] 2. **Earnings Growth**: Profit growth is projected to accelerate from **4%** in 2025 to **14%** in 2026, driven by advancements in **AI**, the "Going Global" initiative, and anti-involution policies [4][49] 3. **Valuation Levels**: Current valuations for MSCI China and CSI300 are at **12.4x** and **14.5x** respectively, which are considered fair relative to macroeconomic forecasts [4][66] 4. **Investment Flows**: Anticipated investment flows include: - Southbound net buying could reach **US$200 billion** - Domestic asset reallocation could bring **Rmb3 trillion (US$420 billion)** to equities - Dividends and buybacks may total **Rmb4 trillion (US$570 billion)** this year - IPO fundraising may exceed **US$100 billion**, an **80%** year-over-year increase [5] 5. **Sector Preferences**: Positive outlook on sectors such as **AI**, **Consumer Services**, and **Insurance**, with a focus on materials in cyclicals [6] Additional Important Insights 1. **Macroeconomic Indicators**: - Real GDP growth forecast raised from **4.3%** to **4.8%** for 2026, supported by strong exports [19] - Inflation expected to remain low, with **0.6% CPI** and **-0.7% PPI** for 2026 [19] - Exports projected to grow by **5.6%** in nominal USD terms despite potential trade frictions [19] 2. **Housing Market**: Anticipated decline in housing sales by **8%** in value and **6%** in volume, continuing a downcycle since 2021 [19] 3. **Consumption Growth**: Household consumption growth expected to stabilize at around **4.5%**, supported by fiscal spending and emerging consumption categories [19] 4. **Policy Environment**: - Continued supportive policies for private-owned enterprises (POEs) and a pro-equity stance from the government [33] - Fiscal deficit projected to rise to **12.2%** of GDP in 2026 to support growth initiatives [33] 5. **Earnings Projections**: - Earnings for MSCI China expected to grow by **14%** in 2026, with significant contributions from AI and exports [49][52] - Traditional consumption sectors may face pricing pressures, while service-oriented sectors are expected to benefit from policy focus [49] Conclusion The outlook for the China equity market in 2026 is optimistic, driven by strong earnings growth, supportive policies, and significant investment flows. Key sectors such as AI and consumer services are expected to lead the growth, while challenges in the housing market and traditional consumption sectors remain.

While Beijing’s recent push to curb overcapacity is helping rein in the glut in steel and solar sectors, the “anti-involution” campaign is missing a stimulus spark and could hurt the economy instead of bringing inflation back https://t.co/3PTiDR1Ain ...