On Wednesday, the A-share market experienced a significant surge with heavy trading volume. The Shanghai Composite Index rose over 1%, reaching a new high for the year. This notable upward movement has sparked discussions among investors about whether this bullish trend can be sustained.
By the close of trading on June 25, the Shanghai Composite Index had increased by 1.04% to 3,455.97 points, marking its highest level this year. The STAR 50 Index saw a gain of 1.73%, while the Shenzhen Component Index advanced by 1.72%. The ChiNext Index outperformed with a substantial rise of 3.11%. The total trading volume for the two markets reached 1,602.8 billion yuan, an increase of 188.2 billion yuan from the previous session.
What Fueled the Market's Positive Sentiment?
Several public fund companies have analyzed the drivers behind this rally. They point to improving risk appetite among investors, with non-bank financials, defense military, and computer sectors leading the gains. This optimism stems from multiple event-driven factors, including marginal improvements in the international market environment, a preliminary ceasefire agreement between Iran and Israel, and the approval for Guotai Junan International to provide cryptocurrency trading services. These developments have contributed to expectations of sustained activity in the A-share market.
From "Recovery" to "A Powerful Strike"
China Asset Management described this week's market performance as a transition from "recovery" to "a powerful strike." They noted that Monday and Tuesday's gains were primarily driven by rebounding risk appetite following the resolution of overseas conflicts, coupled with a solid foundation for index反弹.
"After two consecutive days of rises, the赚钱 effect and risk appetite have recovered, making investors more sensitive to positive news," China Asset Management explained. "On Wednesday, the market capitalized on favorable developments for a powerful strike. The news that a Hong Kong-based Chinese securities firm obtained the first license to provide comprehensive virtual asset-related trading services, combined with recent high interest in stablecoins, ignited the securities and fintech sectors, leading the indices higher again."
They highlighted that消息面-driven rallies typically manifest in two ways: either through rapid price increases directly reflecting the news, or as seen on Wednesday, with a gradual intraday climb that indicates broader recognition and diffusion of positive news, underpinned by improving risk preference and the market's own recovery rhythm.
On June 25, Guotai Junan International (01788.HK) announced its approval to provide virtual asset trading services. This news spurred a remarkable 198% single-day surge in the company's stock price and triggered collective gains among Chinese brokerage stocks. Additionally, the Hong Kong Securities ETF (513090) recorded historically high trading volume, with turnover exceeding 27 billion yuan for the first time since its listing, closing up 8.51%.
Bosera Funds analyzed that the confirmation of a ceasefire agreement between Iran and Israel on Tuesday significantly alleviated market避险 sentiment. Simultaneously, the Federal Reserve unexpectedly sent dovish signals, suggesting a potential rate cut next month if inflation remains controlled, easing concerns about global liquidity tightening and directly benefiting capital flows in emerging markets. Both domestic and international information pointed towards enhanced risk appetite, with A-share trading volume noticeably expanding over the past two days.
China Europe Fund similarly noted that the rapid easing of Middle East tensions and optimistic global investor sentiment drove short-term strength in international markets this week. However, uncertainties regarding tariffs and growth persist without significant progress, and domestic industry high-frequency data has yet to show the improvement anticipated by the market. The market might be reacting to short-term消退 of overseas risks, perceiving another trend opportunity.
Puying Anxing Fund added that the "Guiding Opinions on Financial Support to Boost and Expand Consumption" issued by six departments explicitly encourages financial institutions to provide loan support to the education sector, particularly covering vocational education, skills training, and other non-academic institutions. This led to sharp gains in the education sector, exemplified by New Oriental, and overall gains in the Hong Kong consumption sector.
"The market has largely priced in most potential changes, including consensus on world economic expectations and shifts in international capital flows," cautioned China Europe Fund. "But behind the globally optimistic trading sentiment, significant uncertainties still accumulate." They warned that as expectations gradually converge while still not fully aligning with fundamentals, consensus expectations might enter a long-tail stage, necessitating attention to potential increased market volatility in the second half of the year.
Overall, China Europe Fund stated that considering domestic strong policy expectations and a better liquidity environment for Asia-Pacific emerging markets amid a weak US dollar and international capital attention, domestic equity assets might outperform overseas markets in the second half of the year.
Q2 Earnings: A Critical Inflection Point for Validation
With just three trading days left before A shares enter the trading period for the second half of 2025, looking ahead, Yongying Fund maintains a neutral-to-optimistic judgment for the market in the coming months.
From a fundamental perspective, Yongying Fund stated that as steady growth policies continue to exert force, infrastructure investment accelerates its implementation, and consumption stimulus policies take effect, the macroeconomy's stabilization and recovery trend is clear. Industrial enterprise profits are expected to enter a recovery cycle in the second half of the year.
Yongying Fund analyzed that on the policy front, capital market reform dividends are continuously being released. Measures including放宽 insurance fund investment ratios in stocks, optimizing dividend and回购 systems, and improving delisting mechanisms will significantly enhance the A-share market ecology. Regarding capital supply, against the backdrop of maintaining capital market stability being a clear policy goal, policy funds have a strong willingness to support the market, making the probability of significant adjustments relatively limited.
Xinyuan Fund believes that under the combined influence of increasing overseas rate cut expectations, stable domestic economic fundamentals, and repaired market risk偏好, the short-term downside risk for A shares is small. Various event-driven factors will fuel sector rotation. "A trend性上涨 in the equity market requires sustained improvement after the entire A-share market profit touches bottom. Second-quarter earnings will be a crucial验证性拐点."
In the context of an "asset shortage" due to low absolute levels of the risk-free rate, Shangyin Fund believes the A-share market is expected to remain active. Structurally, they emphasize several types of opportunities: first, the large financial sector, which is under-allocated by public funds and still has valuation repair space; second, the scarce resources sector, which overall has low valuation and possesses safety margins and strategic value in global动荡格局; third, sub-sectors benefiting from domestic崛起, either gaining market share or experiencing upward景气, such as innovative drugs, military industry, service consumption, media, and AI.
"The securities sector offers relatively obvious investment性价比," said Feng Chencheng, Fund Manager of Huabao CSI Full Index Securities ETF. He believes that as Hong Kong advances policy implementation like stablecoins, the trading环节 is one area where securities firms can quickly介入. Other leading Chinese securities firms are likely to follow suit.
"Hong Kong market activity continues to increase, further enhancing its strategic position as an offshore financial center. Stablecoin innovation is an important window. International business lines of securities firms have gained a new incremental window for business development," Feng added. "Although the visibility of performance from innovative businesses is weak in the short term, under policy catalysis, the long-term prospects of related businesses still provide valuation uplift space for securities firms with strong competitiveness in overseas business."
Yongying Fund is focusing on two types of assets: first, areas related to new quality productive forces with high elasticity. This can be divided into two major investment opportunities: those still in the process from 0 to 1, primarily represented by new科技, new technologies, and new materials forming new industry trends, such as artificial intelligence, biomedicine, and new materials—sectors with the soil to批量 cultivate gazelle enterprises. The second involves emerging industries in the 1 to 10 development stage, where unicorns are highly likely to emerge, mainly including new energy, intelligent driving, energy conservation, environmental protection, and high-end manufacturing. The second type involves industries and enterprises with stable operational development, focused on their main business, managing development goals and asset structures reasonably, and emphasizing shareholder returns (e.g., leading industries and enterprises in hydropower, nuclear power, internet, petroleum, and petrochemicals). These are less affected by economic recession in Europe and America and serve as important stabilizers for China's economic development.
China Europe Fund is relatively optimistic about stable dividend-yielding stocks and more细分 tech growth within the technology sector, believing that a refined barbell strategy composed of these two possesses certain anti-shock attributes. They also see better fundamental stability in domestic demand-oriented financial cycles when resisting global uncertainty, along with positive sector expectations brought by ongoing policy support.
Bosera Fund stated that subsequent attention should still be paid to Sino-US economic and trade博弈 and the resilience of domestic fundamentals under the influence of external demand. July will usher in the mid-year report disclosure season, and the market may still exhibit震荡态势. In terms of allocation, attention can be paid to the tech + dividend barbell structure and directions with improving performance.
Frequently Asked Questions
What caused the recent surge in the A-share market?
The rally was driven by improved risk appetite, event-driven factors like international market improvements, a Middle East ceasefire, and regulatory approvals for new financial services like crypto trading. These combined to boost investor confidence and trading activity.
Which sectors led the gains during this uptrend?
Non-bank financials, defense military, and computer sectors were among the top performers. Additionally, securities firms and fintech saw significant boosts due to developments in virtual asset trading services.
Is the current market rally sustainable?
Sustainability depends on continued positive fundamentals, such as corporate earnings recovery, effective policy support, and stable external conditions. While short-term optimism exists, analysts advise monitoring Q2 earnings and global uncertainties for clearer direction.
What are the key opportunities highlighted by fund managers?
Managers point to large financials (for valuation repair), scarce resources (for safety margin), and high-growth tech sectors like AI and biomedicine. A barbell strategy combining dividends and tech growth is also recommended for resilience.
How does Hong Kong's policy on stablecoins affect A-shares?
Approvals for virtual asset trading services open new business avenues for securities firms with international operations, potentially boosting their long-term valuations despite short-term performance visibility remaining low.
What should investors watch in the coming months?
Key factors include Q2 earnings reports, domestic policy implementation, overseas rate changes, and geopolitical developments. These will be crucial in determining whether the market moves from event-driven rallies to sustained growth.
For investors looking to navigate these market dynamics and explore strategic opportunities, staying informed on real-time developments is crucial. 👉 Access real-time market analysis tools to enhance your decision-making process. Additionally, understanding sector rotations and policy impacts can provide a competitive edge in identifying promising trends.