Positive Signals Emerge: Where Could Opportunities Lie in China’s A-Share Market?

Preface

After a prolonged decline, signs of stabilization have begun to appear in China’s A-share market. On November 2, the Wind All A Index (881001.WI) rose 1.68%, with more than 4,600 stocks advancing. The following day, broad-market exchange-traded funds recorded unusually high turnover, even as declines outnumbered gains among individual stocks. Policy activity has also drawn attention: the People’s Bank of China and the China Securities Regulatory Commission held a meeting on the securities, fund, and insurance companies’ Swap Facility (SFISF), and the third round of bidding began on November 3. Against this backdrop, private-fund managers are weighing whether the market is nearing a bottom, what could drive a recovery, and which areas may offer selective opportunities. Their views point to a market shaped by valuation, liquidity, industry fundamentals, and pronounced differences between sectors.

Lazy bag

The overall market may be approaching a period of bottom-building, but a broad, uniform rebound is not guaranteed. Fund managers see valuation levels and risk premiums as more attractive after the recent pullback, while warning that near-term trading may remain volatile as investors wait for clearer catalysts. AI-related hardware could continue to face pressure because expectations have shifted and investor positions remain concentrated. Managers are also monitoring AI applications, robotics, pharmaceuticals, consumer-related opportunities, selected high-growth technology companies, and undervalued businesses with stable or improving fundamentals. The central message is to distinguish carefully between industries and companies rather than assume the market will rise together.

Main Body

Recent trading has offered several indicators that investors are watching for signs of stabilization. On November 2, the Wind All A Index (881001.WI) gained 1.68%, and more than 4,600 listed stocks rose. On November 3, the market’s breadth weakened, with more stocks falling than rising, but turnover in several broad-market exchange-traded funds (ETFs) increased substantially. The divergence between individual-stock performance and ETF activity suggests that market participants were active even as sentiment remained uneven.

The Huatai-PineBridge CSI 300 ETF (510300) and the ChinaAMC SSE 50 ETF (510050) recorded total daily turnover of 190.07 billion yuan and 129.05 billion yuan, respectively. Both figures were their highest since January 29, 2026. The Southern China Securities 1000 ETF (512100) recorded total daily turnover of 124.54 billion yuan, its highest since January 22, 2026. These figures are evidence of heavy trading in large and broad-market investment products, but high turnover by itself does not establish whether investors are positioning for a sustained recovery or reacting to near-term uncertainty.

Policy developments have added another factor to the market outlook. On November 2, the People’s Bank of China and the China Securities Regulatory Commission convened a work meeting on the Swap Facility (SFISF) for securities firms, fund companies, and insurance companies. On the same day, they announced that bidding for the third SFISF operation would begin on November 3. More than 30 securities and fund companies have submitted applications. The facility has attracted attention as a potential channel for supporting market liquidity, although the managers quoted in the report emphasize that the timing and impact of additional capital actually reaching the market remain important considerations.

Several managers link the earlier decline to both concerns about the technology investment cycle and weaknesses in the market’s funding environment. Zhou Yingbo, founder of Yunzhou Capital, argues that worries about the technology cycle were only part of the explanation. He also points to structural issues in the funding ecosystem: the absence of a long-term, stable market-stabilization fund; the “long-term capital, short-term assessment” problem in parts of the insurance and fund industries; and large volumes of quantitative capital shifting between sectors at the same time. He adds that the role of short-selling mechanisms in stock pricing remains an area for further discussion and improvement.

In Zhou’s view, developing a strong capital market matters beyond near-term market performance. A better-functioning market can support China’s technological innovation and industrial advancement. As market institutions continue to improve, the environment for long-term investment may strengthen, making it easier for investors to participate in companies’ long-term value creation. This perspective places the recent volatility within a broader debate about market structure and the conditions needed to support patient capital.

Li Ning, chief researcher at Youmeili Investment, told Jiemian News that the firm had conducted a systematic review of the phase of adjustment led by technology stocks since July. Its assessment considered price and volume patterns, valuation levels, overall liquidity, and the medium- to long-term fundamentals of the artificial intelligence (AI) industry. Li believes the A-share market is probably entering a period of bottom-building, with relatively limited room for another deep decline and much of the overall risk already reflected in prices.

That assessment does not imply that every sector will rebound together. Li expects the recovery to be highly selective. Communication equipment, semiconductors, and electronic components—AI hardware areas that experienced substantial earlier declines—may see an uneven and volatile rebound. In Li’s view, shifts in the industry narrative and still-high concentration among investors make a continuous, one-way rally less likely. The distinction is important: a market can stabilize overall while individual industries continue to struggle or move through sharp swings.

Fang Lei, deputy general manager and senior fund manager at StarRock Investment, sees the market as waiting for a more clearly defined catalyst. Such a catalyst could arise from industrial developments, policy measures, or liquidity conditions. Until one emerges, Fang expects the broader market to trade mainly within a range, with sector rotation continuing at a relatively fast pace.

Fang also notes that the previous adjustment has lowered overall A-share valuations. The equity risk premium has returned to a historically elevated percentile range, improving the relative investment appeal of equities. However, favorable valuations alone may not be sufficient to produce a lasting rally. On the industry side, a weakening of the AI narrative and unresolved positioning in the AI supply chain may keep technology stocks under pressure in the near term. At the same time, the improvement in domestic demand has not yet become pronounced, limiting the ability of fundamentals and earnings expectations to drive share prices.

Liquidity presents a further constraint. The third round of SFISF bidding has only just begun, so any incremental capital has not yet been deployed. Fang describes the market as being dominated by competition among existing funds. In that environment, capital may shift between technology shares and dividend-oriented assets while investors wait for a clearer market leadership theme. This helps explain why sector rotation may persist even if broad valuations look more attractive than before.

When discussing investment opportunities, Wu Weizhi, founder of China Europe Robowealth Investment, compares the impact of the technology-hardware sell-off on sentiment to conditions in late 2015. He argues that prior experience with market cycles can help investors interpret the current period. Rather than treating the market as a single opportunity, he describes a “one flower, one world” approach: industries occupy different stages of their own cycles, with some in the middle of a bear market and others at the transition from the end of a bear market to the beginning of a bull market.

Wu cautions against companies and sectors whose valuations remain unattractive after a bubble has burst. At the same time, he says that positive signals have appeared in some industries and companies that have been declining for a long time and may be in the later stages of a bear market. In his view, investors should avoid indiscriminate exposure but consider increasing attention to areas where evidence of improvement is emerging. The approach depends on judging each company and industry on its own conditions rather than relying solely on broad market direction.

Zhou says the market’s decline can create an opportunity to identify new drivers of growth as older ones fade. His firm has recently begun to pay attention to several areas, including AI applications, robotics, pharmaceuticals, and consumer-related industries. These are areas of interest rather than a prediction that each will rise immediately; the broader market environment and the development of each industry remain relevant to their prospects.

Li’s preferred opportunities are lightweight, high-elasticity technology themes with identifiable industrial catalysts. Against a market that is forming a base amid continued volatility, Li believes these more focused themes may offer comparatively stronger potential for phased excess returns. The emphasis on catalysts and selectivity reflects the view that investors may need concrete developments to support individual themes, especially while the overall market lacks a clear, durable driver.

Fang describes the current portfolio approach as balanced. The firm is monitoring both high-growth industries and established core assets. In reviewing third-quarter reports, Fang sees substantial differences in performance across industries and only a limited number of sectors combining delivered earnings with confidence in future growth. This makes company-level fundamental certainty especially important. Within high-growth industries, the firm focuses on technology-growth companies with substantial technical barriers.

Fang also highlights lower-valued assets with a margin of safety, particularly businesses with stable operations or fundamentals that may be improving at the margin. This consideration is linked to the current liquidity backdrop: when new capital is limited and existing investors are largely trading against one another, investors may place greater weight on valuation support and business resilience. A balanced strategy can therefore combine selected growth exposure with assets whose operating profiles or valuations offer a different form of protection.

Taken together, the managers’ comments describe a market in which cautious optimism coexists with meaningful uncertainty. Indicators such as rising index performance on November 2, heavy turnover in major ETFs on November 3, improved valuations, and the launch of another SFISF bidding round have drawn attention. Yet the outlook remains dependent on whether policy and liquidity developments translate into actual support, whether industry fundamentals improve, and whether investors can identify a compelling new market driver. For investors, the shared implication is not to assume a uniform rebound: sector selection, company fundamentals, valuation discipline, and awareness of market liquidity remain central.

Key Insights Table