The performance of the A-share market in China throughout 2024 witnessed a tumultuous journey, marked by fluctuations that eventually concluded with a year-end positive growthAs of December 31, 2024, the number of publicly listed companies in the A-share market approached 5,400, boasting a total market capitalization of approximately 93.95 trillion yuanThis sets the stage for an optimistic forecast for 2025, wherein the capital market is expected to embark on a new growth journey.
With the anticipation of continued domestic counter-cyclical policies and the inflow of new capital, stakeholders in the financial market are hopeful for a gross domestic product (GDP) growth rate of around 5%. Investment professionals express optimism that fundamental aspects of A-share listed companies are primed for recovery, fueling their confidence in the market's trajectory for the upcoming year.
The experts assert that the year 2025 will be a pivotal one, as the Chinese economy works towards restoring its momentumFurthermore, domestic macro liquidity is expected to remain accommodative, setting the stage for a new cycle of profitability, likely characterized by a spiral, oscillating upward movement throughout the yearThe keywords emerging from major brokerages regarding the macroeconomic outlook for 2025 revolve around ideas such as "promoting stability through advancement," "re-entering the arena lightweight," "unifying efforts for innovation," and "reshaping broad-spectrum growth." These expressions strongly underline a consensus that continuous economic recovery is essential.
A comprehensive array of incremental policy measures has been initiated, gaining traction since September 24, 2024. Various monetary, fiscal, and real estate policies have been rolled out in quick successionEvents such as the Central Financial Work Conference and the Central Economic Work Conference, which convened in late October 2024, signaled a shift towards more proactive policymaking that effectively bolstered societal confidence, thus laying a robust foundation for sustained economic improvement.
Expectations for China's GDP growth in 2025 hover around 5%, with investment and consumption rates projected to slightly outpace those of 2024. Analysts point out that the slow yet steady recovery will be crucial as the backdrop of supportive policies continues
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Specifically, the direction of these policies is expected to be more positive and substantially stronger in 2025, as they embody a fundamental shift towards leveraging fiscal intervention to bolster economic activity.
As liquidity continues to remain ample, the momentum of incremental capital flowing into the market is gaining momentumThe year 2024 saw A-shares rebound dramatically on two notable occasionsThe first rebound, occurring between February and early May 2024, was primarily driven by substantial acquisitions of exchange-traded funds (ETFs) by significant institutional investorsThe second surge began on September 24, 2024, fueled by the unveiling of several impactful policy tools intended to boost market confidence.
In terms of market activity, the financing and investment functionalities of the A-share market are evolving hand-in-handData from Wind shows that by the end of December 2024, the total amount of financing increased by over 290 billion yuan, with corporate buybacks totaling a historic 165.92 billion yuanIn addition, stock-type ETFs saw historic net inflows surpassing 1 trillion yuan, all contributing to an unprecedented level of enthusiasm among investors and solidifying liquidity across the board.
Looking ahead to 2025, expectations regarding monetary easing and interest reductions abound, with estimates suggesting a possibility of 40 basis point cuts alongside 100 basis points in reserve requirement ratiosGiven past performance, 2025 may also witness a robust influx of personal investor capital, supported by new tools that are expected to bring around 400 billion yuan into the marketInsurers are poised to play a crucial role as well, amidst the anticipation of foreign investors returning to the market.
Amid these shifts, many analysts expect that the overall risk appetite among investors will surpass that of 2024, with an increasing number of structural opportunities becoming apparentIt is critical to note that the Chinese market has undergone a long phase of adjustment, placing investor confidence squarely in the context of a recovering economy, while global capital flows look to enhance the vibrancy of domestic markets.
As of year-end 2024, the comprehensive rolling price-earnings ratio for all A-shares stood low at 18.53 times compared to other global markets
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