— A-shares have staged an accelerated correction since September, with major broad indices falling sharply and triggering market anxiety. Huafu Securities attributes the sell-off to external shocks and short-term sentiment swings rather than a reversal in fundamental trends. As positive factors keep accumulating, A-share valuation recovery remains promising in the medium and long run.
Ⅰ. Macro Economy Steady and Improving, High-tech Industries Making Rising Contributions.
From a macro fundamental perspective, China’s economy features positive traits: stable aggregate output, new growth drivers and marginal improvement. China’s GDP reached 107.1 trillion yuan in the first three quarters of 2026, rising by 4.6% year-on-year, which met the full-year target and kept its growth rate among the leading major global economies. On a quarterly basis, GDP expanded 4.5% year-on-year and 1.2% quarter-on-quarter in Q3, picking up further from the 0.9% quarter-on-quarter growth recorded in Q2.
Structurally, value added of the tertiary industry increased by 5.2% year-on-year, becoming the core pillar of steady growth. A virtuous cycle is taking shape faster in emerging sectors. The contribution of high-tech industries and new quality productive forces to economic expansion keeps rising. The virtuous cycle in emerging industries has been further consolidated. High-tech industries and sectors related to new quality productive forces are playing a steadily stronger role in driving economic growth. Growth drivers keep upgrading, and internal momentum for economic transformation continues to build up.
Huafu Securities holds that the quarter-on-quarter economic acceleration and marginal uptick in business sentiment in Q3 have eased market pessimism over weak fundamentals to a certain extent, laying a solid foundation for subsequent corporate earnings delivery and market valuation recovery.
Ⅱ.Low Valuations Improve Equity Risk-Reward Trade-off
Following this round of market correction, valuations of core A-share assets have fully priced in pessimistic expectations, and the allocation value of equity markets has gradually emerged. At present, multiple broad-based and sector-themed indices have retreated to relatively low historical percentiles. Valuations of some growth sectors are hovering at one-year lows, while value sectors including financials and cyclicals are also trading at historic lows. The negative factors weighing on valuations have already been largely reflected in share prices, leaving limited downside scope and a notably improved risk-reward profile.
Huafu Securities argues that current valuation levels have fully factored in external shocks and short-term sentiment-driven worries. Going forward, as long as corporate earnings stabilize marginally and liquidity expectations improve moderately, equities will see solid upward recovery elasticity. From a structural perspective, high-quality stocks with solid earnings visibility and reasonable valuations are poised to enter a favorable allocation window.
Ⅲ.Policies and Capital Keep Building Momentum; External Disturbances Will Not Alter the Medium-to-Long-Term Trend
Positive signals are building up simultaneously on both the funding and policy fronts. On one hand, broad-based ETFs have seen net inflows for consecutive trading days, showing clear signs of contrarian positioning by institutional capital. On the other hand, since 2026, the aggregate upper limit of share repurchase and shareholder increase plans on the Shanghai and Shenzhen stock exchanges has exceeded RMB 100 billion. Industrial capital has demonstrated its recognition of corporate intrinsic value with substantial capital outlays. On the policy side, the Ministry of Finance issued the first tranche of RMB 150 billion in special treasury bonds to recapitalize central financial institutions, creating more room for credit expansion and long-term asset allocation.
Huafu Securities argues that the current market correction is mainly driven by external valuation pressure stemming from persistently elevated U.S. Treasury yields and weaker overseas financing expectations for the AI sector, while domestic fundamentals have not deteriorated. After the accelerated index pullback in late September, market sentiment and investor positions have fallen to low levels. As the Q3 earnings disclosure season draws to a close, the inflection point for earnings recovery is expected to be further confirmed. Coupled with continuous inflows of incremental capital, the market will gradually price out external disturbances and return to the fundamental-driven pricing narrative. Investors are advised to stay immune to short-term sentiment swings, avoid panic selling, focus on high-quality stocks with well-matched earnings performance and valuations, and maintain rational and patient allocation.
Contact Info:
Name: Xing Chen
Email: Send Email
Organization: Huafu Securities Co., Ltd
Phone: (+86) 15618403579
Website: https://www.hfzq.com.cn/
Release ID: 89207750
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