Opportunities likely in industries such as AI, tech-based manufacturing

The Thursday adjustment in most sectors in the A-share market is an oft seen phenomenon after days of sharp advances, and it will not impact the structural opportunities and long-term upward trend in the Chinese capital market, said experts.

Their comments were made on Thursday after the benchmark Shanghai Composite Index shed 1.25 percent to close at 3765.88 points and the Shenzhen Component Index closed 2.83 percent lower. Trading activity remained high, with the combined trading value on the Shanghai and Shenzhen bourses exceeding 2.54 trillion yuan ($360 billion), 7.6 percent higher than the previous trading day.

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Fluctuations may not be avoided in September as the A-share market faces some profit-taking pressure after rapid increases in the previous two months, said Zhang Yidong, chief global strategist at Industrial Securities, adding that regulators will strive to safeguard market stability and avoid an irrational bull run.

But over the medium to long run, the Chinese stock market — including both A-shares and Hong Kong shares — is likely to see sustained bull markets, thanks to the country's high-quality economic growth, the larger amount of social wealth directed to the stock market, breakthroughs in emerging technologies such as artificial intelligence, and the return of global capital, Zhang said.

Analysts at China Securities said that structural opportunities are implied in the A-share market as China is seeing new economic drivers playing a bigger role. In specific, these opportunities may be churned out in industries such as AI, technology-based manufacturing and humanoid robots, they said.

The balance of Chinese household savings was as high as 162 trillion yuan as of end-June, of which 33 to 60 trillion yuan can be defined as excess savings based on different securities brokerage calculations, said Xue Hongyan, deputy director of consulting firm Star Atlas Institute of Finance.

Given the low interest rates in China and the weakening investment function of properties, such excess savings will flow into equities at a faster pace, serving as a major contributor of the A-share market's incremental capital, Xue said.

As China's first qualified foreign institutional investor, UBS has seen overseas investors' increasing interest in China, which is especially noticeable amid the current global trend of investment diversification, said Fang Dongming, head of China Global Markets at UBS.

In June, overseas investors held over 3 trillion yuan of A shares, accounting for 7.4 percent of the A-share market's total free-float market cap. UBS predicts that 2025 might be a big year for China assets, said Fang.

The anticipation of interest rate cuts globally, combined with the low interest rates in China, have provided an amiable liquidity environment for introducing more capital into the Chinese stock market. It is increasingly evident that the Chinese stock market has become more profitable, further attracting the participation of foreign investors, he said.

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Experts from the world's largest asset manager BlackRock said that the A-share market is likely to sustain the recent bullish performance thanks to various positive developments. China registered a 5.3 percent GDP growth in the first half, showing continued recovery in economic fundamentals. A-share companies' operational resilience is proven by the higher revenue and profitability in their half-year fiscal results. And the central government's attention directed to the capital market has served as a cushion for market adjustments, helping to elevate market activity, they said.

Meanwhile, the anticipation of the US Federal Reserve to lower interest rates has been rising. This will further improve liquidity in bourses worldwide, which is conducive to the performance of equities, they said.

Contact the writer at shijing@chinadaily.com.cn