Policy boost lifts hopes of A-share market rebound

China's long-term economic and technological trajectory remains intact despite recent market volatility, and expectations of stronger policy support are boosting investor confidence and improving the outlook for a rebound in the A-share market, analysts said.

Confidence has also been reinforced by coordinated market-support actions. A number of centrally administered State-owned enterprises have unveiled share buyback or stake-increase plans in recent days. At the same time, leading insurers have announced plans to increase equity investments in technology, advanced manufacturing and other strategic sectors, adding to expectations of stronger long-term capital inflows.

On Tuesday, the market responded positively to the recent developments. After sliding nearly 6 percent since the beginning of July, the benchmark Shanghai Composite Index rose 1.79 percent, with technology shares leading the recovery. The ChiNext Index in Shenzhen surged 7.05 percent and the STAR 50 Index in Shanghai jumped 10.73 percent.

Wu Qing, chairman of the China Securities Regulatory Commission, underscored that efforts will be made to secure market stability.

Addressing a symposium with investors on Monday, Wu said that a comprehensive set of measures, including risk surveillance, countercyclical regulation, quality enhancement of listed companies, rigorous law enforcement and introduction of medium- and long-term capital into the market, will be deployed to resolutely prevent any major market swings.

Between Sunday and Monday, multiple State-owned enterprises, including Aluminum Corp of China, SDIC Power and China National Coal Group Corp, announced buyback or stake-increase plans.

Since the beginning of July, nearly 300 companies have completed share repurchases totaling more than 15 billion yuan ($2.2 billion), while major shareholders of nearly 120 listed companies recorded net increases in their stakes.

Industry giants are leading the buyback wave. Consumer electronics makers Midea, TCL and Haier together repurchased nearly 4.9 billion yuan worth of shares. Tech heavyweights such as ZTE and iSoftStone have also implemented their buyback plans.

Meanwhile, two State-owned capital platforms — China Reform Holdings and China Chengtong Holdings — increased their holding of A shares and will continue to buy more by using their own funds and a central bank lending facility, providing strong liquidity support to the market.

According to Tian Lihui, a professor of finance at Nankai University, the recent market swings, which are irrational short-term sell-offs, have resulted in a deviation between price and fundamentals. The buybacks will anchor core-asset pricing, stabilize overall market expectations and help direct the capital to technology innovation in the long run, he said.

Song Xuetao, chief economist at Sinolink Securities, explained that this round of global stock market jitters has been triggered by overseas market volatility. The recent decline in A shares is thus a result of overseas risk contagion and trading-level disturbances.

"China's growth logic and industrial development trend remain unchanged," he said.

Xun Yugen, chief economist at Guosen Securities, said that the recent A-share market volatility is an adjustment amid a bullish trend. It is by no means an end to a stock market bull run, he added.

According to Liu Chenming, chief strategist at GF Securities, positive factors are accumulating in the A-share market, including the inflow of incremental capital from exchange-traded funds, improving profitability of companies proved by their interim results, and the upward momentum in emerging industries.

During the trading week ending Friday, the net capital inflow into broad-based ETFs totaled 152.5 billion yuan, the third-highest amount since the latest bull run started in September 2024.

About 1,700 A-share companies have released interim earnings previews so far, with 43 percent delivering positive results. The positive rate is significantly higher among tech-focused companies, with 88 percent of STAR Market companies and 79 percent of ChiNext-listed ones reporting positive results. Artificial intelligence-related sectors and resources led the gains, market tracker Wind Information said.

Tao Chuan, chief economist at Guolian Minsheng Securities, said the steady stream of positive AI developments, best represented by the World AI Conference held in Shanghai and the standout performance of the recently released Kimi K3 model, confirms that the country's tech sector is rapidly realizing its high-growth trajectory.

The underlying narrative of China's economic recovery and the ascent of its tech sector remains intact, paving the way for market stabilization, a potential rebound and continued structural opportunities among A shares, he said.

Major insurers such as Ping An, the People's Insurance Company of China, China Pacific Insurance Co and New China Life announced on Monday their plans to increase equity investments in tech, advanced manufacturing and value assets.

Meng Lei, UBS Securities China equity strategist, reaffirmed that technology and AI will remain the core investment themes for the rest of 2026. Apart from strong earnings growth, the sectors will be supported by marginal net inflows from ETFs, active mutual funds, margin financing and private equity, he said.