Recently, the Chinese market has shown strong momentum, with both Hong Kong stocks and A-shares experiencing continuous rises across multiple indices. This is driven by a confluence of factors, including policy measures, corporate performance, and capital flows.
On August 14, the Zhiyuan Finance APP learned that Goldman Sachs has made a significant statement after a six-month hiatus, clearly expressing its stance of “re-entering the market and going long on China.” Recently, the Chinese market has shown strong momentum, with both the Hong Kong and A-share markets seeing multiple indices continuously rise, driven by a resonance of various factors including policy, performance, and capital. What are the current highlights in the market, and how should one position themselves?
Both the Hong Kong and mainland markets are experiencing a robust upward trend, with multiple indices reaching a strong phase—southbound capital is accelerating its inflow into Hong Kong stocks. On August 15, despite a slight adjustment in the three major Hong Kong indices, net purchases from southbound capital amounted to approximately HKD 35.876 billion, setting a record for the highest single-day net inflow. Year-to-date, the cumulative net inflow has reached HKD 939.921 billion, far exceeding last year’s total of HKD 807.869 billion.
The three major A-share indices saw significant gains today, with the Shanghai Composite Index returning to the vicinity of 3,700 points. The trading volume exceeded 2.2 trillion yuan, marking the 29th trading day in A-share history where the trading volume surpassed 2 trillion yuan.
From early April to the present, the CSI 300 Index has risen for four consecutive months, potentially setting the longest consecutive rise since 2020. Notably, the small and medium-cap indices, primarily driven by technology stocks, have performed exceptionally well, with the CSI 1000 Index (excluding OFAC constituent stocks) recording a cumulative increase of over 12%. Importantly, this round of rebound is not merely a “****”—the average monthly trading volume in A-shares has increased for three consecutive months, with genuine trading activity supporting the market.
Five core driving forces underpin market confidence.
1. Policy initiatives: A dual approach to consumption and industry.
The government recently launched a personal consumption loan interest subsidy program to directly boost consumer confidence; in the new energy sector, eight lithium battery companies reached a consensus to “pause expansion,” and the “anti-involution” initiative is driving industry valuation recovery, leading to significant stock price increases. The policy not only stimulates demand but also stabilizes supply, providing the market with a sense of reassurance.
2. Technology stocks experience explosive performance: AI becomes the biggest catalyst.
The earnings season for technology companies has commenced, with leading firms demonstrating impressive results:
Tencent reported a revenue of 752.906 billion yuan for the second quarter of 2025, with an adjusted earnings per share of 27.52 yuan, both exceeding market expectations by 3%. Benefiting from AI-driven improvements in advertising efficiency, Tencent’s marketing services revenue increased by 20% year-on-year, with video accounts and mini-program advertisements both rising by 50%, and WeChat search advertisements increasing by 60%. Game revenue grew by 22% year-on-year, with classic IPs like ‘Delta Force’ continuing to contribute significantly; financial technology and enterprise service revenue increased by 10%, driven by a surge in demand for AI-related services.
Not only Tencent, but companies such as JD.com and NetEase also delivered robust results: JD.com’s core retail profit increased by 38% year-on-year, and NetEase’s game revenue and deferred revenue both maintained double-digit growth, highlighting the ‘evergreen attributes’ of established IPs.
3. Funding conditions are favorable: Retail investors dominate, and sentiment is not overheated.
In this round of market activity, retail investors have become the main force — the balance of margin financing and securities lending has exceeded a ten-year high, reaching 202.035 billion yuan. However, Goldman Sachs’ retail sentiment indicator shows that the current sentiment remains moderate, with no signs of excessive euphoria, indicating that there is still room for further upward movement.
(The outstanding balance of margin financing and securities lending in A-shares, with the yellow line indicating a 10-year high)
It is noteworthy that the operations of the ‘national team’ have been calm, indicating that the market’s rise relies more on ‘real demand’ rather than short-term policy support, thereby establishing a more solid foundation.
4. Expectations for foreign capital ‘replenishment’ are heating up
Goldman Sachs data shows that in July, its Prime brokerage ledger experienced a net outflow from the Chinese market; however, there is a divergence between the current nominal total market capitalization and net market capitalization. Institutions believe that if global funds concentrate on replenishing buy orders, it could further amplify upward momentum. Additionally, the basket of the most shorted stocks in Hong Kong rose by 2.7%, exceeding the increase of the Hang Seng Index, with short covering also boosting the market.
5. Liquidity provides support
In June, China’s liquidity supply grew by 4.6% year-on-year, marking the largest increase in over two years. The abundant funding environment not only hedges against potential profit-taking pressures but also provides sustained support for the stock market.
Investment strategy: Focus on these directions
Goldman Sachs trading desk has clearly stated that they still prefer mid-cap indices in Hong Kong and A-shares (CSI 500/1000).
From a sector-specific perspective, Goldman Sachs prefers the following directions:
Technology and AI industrial chain: The AI applications of companies such as Tencent and JD.com have already shown results, while the semiconductor sector (e.g., Ruijie Networks, Shentong Computer) and data centers (GDS Holdings, 21Vianet) have benefited from the explosive demand for computing power, with remarkable growth in niche fields such as 800G switches.
Consumer recovery chain: Policy subsidies directly benefit industries related to consumer loans, coupled with the improvement of retail companies’ fundamentals (e.g., JD.com’s profit growth), making quality consumer leaders worth attention.
‘Anti-involution’ industries: Sectors such as lithium batteries and photovoltaics that have reached a consensus on capacity are seeing an optimization in competitive landscape, with leading enterprises expected to restore profitability.
High-growth small and mid-cap stocks: The constituents of the CSI 1000 Index are mostly hidden champions in niche sectors, benefiting from liquidity easing and industrial upgrading, with significant elasticity to be anticipated.
The current rebound in the Chinese market is the result of a resonance between policies, performance, and capital. Goldman Sachs’ ‘buy’ signal may confirm this trend.
For investors, grasping the main themes of technological upgrading, consumer recovery, and industrial optimization may allow them to find their own opportunities in this market cycle.
