Cheng Qiang of Topsperity Securities: "National Rejuvenation Narrative" Reshapes Confidence in Chinese Assets, A-Shares Slow Bull Market Anticipated

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Topsperity Securities Research Institute Director and Chief Economist Cheng Qiang recently emphasized in an exclusive interview that the "national rejuvenation narrative" is driving A-shares into a slow bull market. He stressed that broad-based indices remain significantly undervalued, positioning China's capital market as a global value depression. Cheng expressed long-term optimism toward technology, advanced manufacturing, and new consumption sectors, while highlighting how the "anti-involution" policy will optimize industrial competition and boost corporate profits. This analysis provides investors with a clear roadmap for long-term asset allocation based on profound insights into China's economic transformation.

Cheng identified the "national rejuvenation narrative" as the core driver behind this year's stock market rally. Breakthroughs like DeepSeek, the blockbuster film Ne Zha 2, and resilient export performance amid tariff pressures have collectively reshaped confidence in China's economy. Challenges including property market transitions and weak consumption are now viewed as solvable temporal issues. This narrative has elevated global risk appetite, prompting capital to re-evaluate Chinese assets and lift A-shares and H-shares from valuation lows. As of September 4, 2025, the dynamic P/E ratios of major A-share indices range between 12-39x: the SSE 50 at merely 11.8x and ChiNext at 39.3x-with historical percentile levels at just 53% (5-year) and 31% (20-year), far below the S&P 500's 28-41x at 80-90th historical percentiles. China remains a compelling value depression, evidenced by accelerating foreign capital inflows into Hong Kong stocks.

Within this valuation opportunity, Cheng advocates strategic focus on three transformation-aligned pillars: technology, advanced manufacturing, and new consumption. These sectors epitomize China's dual-track economic restructuring: on the supply side, the shift from mass manufacturing to new quality productive forces-driven advanced production; on the demand side, the transition toward quality-of-life consumption (particularly Gen Z-oriented services) rather than traditional real estate-linked sectors like home appliances and furniture. While A-shares remain in an earnings trough, structural opportunities are pronounced. TMT and advanced manufacturing exhibit high growth momentum, serving as core market engines. Though consumption recovery lags, new consumption enjoys explicit policy support. Sectors such as AI, computing power, and robots are highly sought after due to policy support, growth potential, and sustained catalysts.

Cheng interprets the central government's "anti-involution" policy as a long-term top-level design targeting two distortions: local governments' chaotic investment promotion practices and corporate "low-price-for-market-share" tactics. These practices generate negative externalities that erode profits, suppress wages, and weaken purchasing power. Manufacturing sectors including automobiles, photovoltaics, and building materials stand to benefit most from improved competition. Unlike the 2015 supply-side reform, this market-driven approach features milder price volatility. Policy implementation will unfold in three phases: initial thematic opportunities, micro-level supply-demand rebalancing, and eventual profitability enhancement. Following prolonged negative PPI, midstream manufacturers are poised for a valuation-and-earnings "Davis Double Play," injecting fresh momentum into Chinese asset repricing.

In conclusion, Cheng asserts that China's economy is advancing toward higher-quality development. The synergy between the "national rejuvenation narrative" and structural reforms will sustain the A-share slow bull market. Investors should capitalize on undervalued opportunities in technology, advanced manufacturing, and new consumption while monitoring manufacturing dividends unleashed by "anti-involution" policies. The resurgence of confidence in Chinese assets stems not merely from current data but from the robust logic underpinning long-term transformation.
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