From hope to hard numbers: why China stocks will need profits to boost the bull run
Chinese shares surged in 2025 on a confidence-led re-rating – strategists now say the next leg in 2026 will hinge on an earnings uplift
After a year-long rally in Chinese stocks powered by multiple expansion as confidence recovered, investors now say that the bull run could find fresh legs in 2026 – this time underpinned by stronger earnings growth.
Supportive macro policy, the push for technological self-reliance and Beijing’s effort to retire obsolete capacity in parts of the green industry are expected to lift margins and profits.
That would make earnings, not valuation, the key driver for equities in the year ahead.
With much of the confidence-driven re-rating already banked, extending the rally will depend on fundamentals: steadier nominal growth, easing producer-price deflation and stronger pricing discipline in oversupplied sectors.
UBS Group predicted that the profit growth rate would accelerate to 8 per cent from 6 per cent in 2025, because of faster nominal economic expansion and a smaller decline in producer prices, while JPMorgan Chase expected growth to range between 9 and 15 per cent.
A switch to earnings growth from multiple expansion would put Chinese equities on a firmer footing, particularly after positives from the nation’s dominant position in the tech industry, waning geopolitical tensions and monetary easing in the US have been largely priced in.
While both benchmarks of Chinese and Hong Kong stocks have made their way into the ranks of the world’s best-performing markets this year, the outperformance means that stock gains may stall with little room for valuation expansion to run, unless earnings growth catches up.