Anben Investment China Equity Director Li Jianyu: 2026 Forward Look - The Rapid Opportunities and Diverging Challenges in the Chinese Market

Entering 2026, the Year of the Horse, the Chinese market has demonstrated a strong momentum that exceeds most investors’ expectations from a year ago. We believe the market may either surge forward like a swift horse or face a highly differentiated return landscape. The explosive development of artificial intelligence, effective policy stimulation, and the stabilization of the RMB exchange rate could continue to drive market gains and are expected to further expand in the second half of 2026. Against this backdrop, focusing on companies with innovative capabilities, capital discipline, and visible profitability will yield substantial returns.

Leading the Charge: Artificial Intelligence Drives the Tech Infrastructure Wave

Looking back at 2025, the emergence of DeepSeek was regarded worldwide as China’s “Satellite Invention Moment,” making global investors deeply aware of China’s significant progress and rapid development in innovation. The world is no longer solely focused on American tech companies. Today, China has also become a focal point of global innovation.

In this context, we believe that AI and the technology sector will become the main market themes in early 2026. Currently, the market has not fully recognized that China’s artificial intelligence ecosystem is iterating and innovating at an astonishing pace. With capital guidance and policy support in place, AI technology will see geometric improvements in architecture choices, open-source proliferation, and engineering practicality. We expect more companies to transform technological solutions into products and widely apply them across the industry ecosystem. This development path, characterized by “gradual progress leading to explosion,” precisely matches China’s AI industry rhythm; continuous incremental technological iterations are building momentum for key industry turning points.

This situation will make the market full of variables and highlights but also accompanied by significant volatility. If AI and hardware industries overheat in the short term, triggering rapid valuation increases and bubble risks, the market may shift to defensive assets earlier than expected—this risk could accelerate after the March earnings disclosure period.

Therefore, the key to investment is not the AI algorithms themselves but the supporting “infrastructure” system—covering data centers, hardware components, industrial automation, and embedded software across the entire chain—as well as those critical support links that have not yet been fully valued in demand-driven technological chains. Ultimately, successful companies will possess scalable data access rights, robust financial structures, and sustainable profitability.

A Smooth Ride: High-Quality Companies Through Cycles

Additionally, the market may further expand in the second half of the year. If policy support intensifies, promoting capacity optimization and demand recovery, corporate earnings recovery could drive a revival in traditional industries, including consumption.

Nevertheless, industry “new-old differentiation” will continue: emerging consumer sectors like pet food show strong growth resilience, while essential consumer goods industries are still struggling with destocking. Policies have clearly pointed toward domestic demand-driven growth and economic rebalancing. In this environment, consumer leaders with pricing power, controllable distribution channels, and resilient cash flows will have a competitive advantage.

Riding the Horse to Wealth: RMB Strength Supports Stock Market Performance

At the start of 2026, the RMB exchange rate has received stronger support. With the Federal Reserve’s rate cuts leading China’s, the narrowing of US-China interest rate spreads, and the short-term weakening of the US dollar, coupled with China’s robust exports, the RMB has stabilized and strengthened. A stronger RMB typically attracts foreign capital inflows and boosts market risk appetite, benefiting A-shares. This also indicates more stable capital flows and more positive market sentiment.

(Article source: Securities Market Weekly)