China Equities: Establishing a Stronger Foundation
We maintain a positive outlook on China equities, supported by structural growth drivers
Chief Investment Office19 Sep 2025
  • Brighter outlook for China equities; re-rating story at early innings, tailwinds at play
  • Structural recovery underpinned by capital allocation to onshore equities
  • Wealth rebalancing into capital markets to persist
  • Prefer tech leaders, beneficiaries of domestic consumption pickup, dividend-yielding financials
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Momentum builds. Growth momentum and investment sentiment towards China’s onshore equities have remained robust in 2025, as investors look beyond concerns about the relatively muted near-term economic outlook, the noise suggesting that the liquidity-driven rally may be over, and the views questioning whether a scenario similar to the 2015 sell-down could repeat.

We believe the re-rating story for China equities is at its early innings and buoyed by several tailwinds. Chinese companies are reporting more resilient financials despite lingering near-term economic headwinds, as reflected in the upward trend of dividend per share (Figure 1). Additionally, there is significant potential for the country’s household wealth, currently heavily concentrated in deposits and real estate, to rebalance into capital markets. Against this backdrop, we see an increasingly brighter outlook for China equities, including onshore markets.

We maintain a constructive stance on China equities given structural improvements. Timely and controlled regulatory interventions should progressively reduce unwanted market volatility and enhance the investability of the A-share market. This should in turn facilitate the reallocation of household wealth into the equity market and drive a structural rally. Further progress in China’s economic reforms, efforts under the anti-involution campaign, and a progressively stabilising fundamental outlook among listed companies should also reinforce this trend.

Focus on sectors poised for strong performance. We reiterate our preference for new economy sectors (domestic technology), under-valued cyclicals, and companies set to benefit from a resurgence in consumer spending.

  1. Technology, particularly platform companies and those involved in the upstream portion of the A.I. value chain (e.g. foundries/chip designers, AI processors, data centers, robotics), are poised to ride on China’s shift towards innovative sectors and benefit from capex-heavy plans by both US and China hyperscalers. The development of cutting-edge foundry capacity underscores the country’s technological advancements towards self-sufficiency in select industries.
  2. Undervalued cyclicals and consumer discretionary, particularly emerging local brands that are poised to benefit from China’s gradual macro stabilisation, improved margins from the execution of the anti-involution campaign, and stronger spending propensity supported by the positive wealth effect from the onshore equity market.
  3. Large banks and financials as reliable yield contributors that are able to consistently deliver stable and compelling dividends, offering attractive yields relative to China’s low deposit rate environment.

We also see investment opportunities in non-bank financials, stock exchanges, and industrials. The first two stand to benefit from a structural pickup in the onshore equity market and liquidity flows, while industrials are likely to ride on stabilising output costs and an improving profitability outlook as onshore competitive pressures ease.

There is ample room for China equities to re-rate as investment funds rotate into under-owned and attractively priced markets, supported by secular trends. As investors recalibrate their investments in an uncertain world, the potential for China equities becomes even more compelling.

We advocate maintaining an overweight position in China equities, with a focus on sectors poised for strong performance, including new economy, technology, platform companies, undervalued cyclicals, and those positioned to benefit from a resurgence in consumer spending. Timely and well-calibrated regulatory interventions should progressively reduce unwanted market volatility and enhance market investability, facilitating the reallocation of both investment funds and household wealth into the equity market, thereby driving a structural rally.


Figure 1: Dividend Per Share (DPS) continued to rise despite macro headwinds

Source: Bloomberg, DBS

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