Citic Securities Qiu Xiang: Rising Corporate Profit Margins Are Key to Sustained Bull Market in A-Shares in the Next Phase

China Economic Journal Reporter Sun Ruxiang and Xia Xin Beijing Report

“Q2 is a critical window for rebuilding confidence on the path of a slow bull market in A-shares, and the long-term stabilization and rebound of corporate profit margins are essential prerequisites for the continuation of the bull market in A-shares,” said Qiu Xiang, Chief A-Share Strategist at CITIC Securities, at the CITIC Securities 2026 Spring Capital Market Forum on March 19.

Qiu Xiang believes that whether at the index level, valuation level, or macro liquidity level, spring marks a key juncture for A-shares: the monthly chart of the Shanghai Composite Index is at a resistance line that has been in place since October 2007, spanning over 20 years. Whether it holds steady or pulls back will greatly influence investor confidence; after a year and a half of a bull market, valuation percentiles of major broad-based indices have moved up a notch, with most broad-based valuations above the 80th percentile over the past 10 years, indicating limited apparent revaluation space; the Middle East conflict has caused significant negative shocks to global supply chains and financial conditions, suppressing risk appetite.

However, the fact that prices have risen for a long time, valuations are not cheap, and positions are high is only a static phenomenon. Many industries still have profit margins at historic lows. The coexistence of “expensive” valuations and “low” profits is a prominent structural feature of this round of market.

“To take the index to the next level in the future, valuation alone is not enough. The core depends on whether China’s advantageous manufacturing sector can systematically convert its market share advantage into a long-term increase in profit margins. If validated, the market perception of ‘short bull, long bear’ over the past 20 years in A-shares will be reshaped,” said Qiu Xiang. One of the most important investment clues this year is to go long on PPI and CPI.

Qiu Xiang believes that the rapid rise in oil prices provides an opportunity to test China’s advantageous manufacturing sector’s pricing power. From a style perspective, the Middle East conflict is a catalyst for style rotation this year. Against the backdrop of rising global costs and weakening financial conditions, low valuation and pricing power are two very important factors. From an industry trend perspective, code expansion and physical scarcity are reflected in China as an increase in the pricing power of advantageous manufacturing industries. Accelerated disruptive innovation in AI and disruptions in the global energy supply chain are strengthening this trend.

In terms of allocation, Qiu Xiang recommends firmly focusing on re-establishing the valuation weight of China’s advantageous manufacturing sectors (chemical, non-ferrous metals, electrical equipment, new energy), with price increases still being the core trading clue, while also increasing exposure to low-valuation factors (insurance, securities, electricity).

(Edited by Xia Xin, Reviewed by Li Huimin, Proofread by Wan Ling)