{"id":27614,"date":"2026-02-13T17:39:00","date_gmt":"2026-02-13T09:39:00","guid":{"rendered":"https:\/\/www.syfe.com\/magazine\/?p=27614"},"modified":"2026-04-09T16:32:38","modified_gmt":"2026-04-09T08:32:38","slug":"chinese-lunar-new-year-of-the-fire-horse-investment-themes-chinese-equities-2026","status":"publish","type":"post","link":"https:\/\/www.syfe.com\/magazine\/chinese-lunar-new-year-of-the-fire-horse-investment-themes-chinese-equities-2026\/","title":{"rendered":"The Year of the Fire Horse: Three Themes Firing Up Chinese Equities in 2026\u00a0"},"content":{"rendered":"
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As we celebrate the Chinese New Year, symbolised by the energetic \u201cfire horse\u201d in the Chinese zodiac, we identify the key themes that could keep the Chinese stock market racing ahead \u2013 and potentially fire up your portfolio this year.<\/p>\n\n\n\n

Why China, Why Now? From \u201cUninvestable\u201d to a \u201cVery Chinese Time\u201d<\/strong><\/h3>\n\n\n\n

Chinese equities have turned a corner. From being \u201cuninvestable\u201d in the eyes of bearish foreign investors, to one of the best-performing markets last year (MSCI China was up more than 30%), China\u2019s stock market has rallied on policy support and breakthroughs in artificial intelligence. Authorities and analysts are talking about a \u201cslow bull\u201d market that could last several years.<\/p>\n\n\n\n

There are signs that cash-rich Chinese households are mobilising more of their capital into the stock market, helped by interest rate cuts making deposits less attractive. Money supply data is reaffirming this trend (with narrowing M1-M2 growth) and pointing to recovering confidence among domestic investors.<\/p>\n\n\n\n

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Policy support will continue to feature. State funds have bought shares to support the market during periods of weakness. Earnings momentum has picked up as the growth outlook improves, setting up China on course to catch up with other major markets.<\/p>\n\n\n\n

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In our Core Portfolios<\/strong><\/a> <\/strong>at Syfe, we have been \u201coverweight\u201d on China, meaning we put more money in Chinese stocks than our benchmarks recommend, which has contributed to performance over the past few years. Syfe users can also access some of the themes below through the China Growth Portfolio<\/strong><\/a> (powered by KraneShares, iShares, and Global X).<\/p>\n\n\n\n

Many global investors, while still \u201cunderweight\u201d, could move in our direction as they seek to diversify from concentrated markets<\/a> this year. Perhaps, just like the recent Gen Z trend<\/a> romanticising Chinese culture, they, too, are about to enter \u201cvery Chinese time\u201d in their portfolio.<\/p>\n\n\n\n

Theme 1: “Anti-Involution” Revolution<\/strong><\/h3>\n\n\n\n

One long-standing challenge in China is excessive capacity. Simply put, Chinese companies produced too much for the market to consume. What followed was a \u201crace to the bottom\u201d with ever-lower prices, contributing to deflation. This combination, coined \u201cinvolution\u201d, has put pressure on corporate earnings in recent years, which have grown slower than nominal GDP, according to research by Goldman Sachs.<\/p>\n\n\n\n

Policymakers have made it a priority to put a stop to it, aware of the dangers deflation poses (they needn\u2019t look far, with Japan only recently recovering<\/a> from it). Pivoting away from \u201cgrowth at all costs\u201d, companies are encouraged to cull supply and focus on returns on investment, especially in sectors with years of oversupply, such as solar energy and batteries. Several cyclical sectors \u2013 cement, solar, and chemicals \u2013 where policymakers are focusing their \u201canti-involution\u201d efforts, are still considered cheap by analysts at Goldman Sachs.\u00a0<\/p>\n\n\n\n

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Theme 2: The \u201cBasket of Tomorrow”<\/strong><\/h3>\n\n\n\n

Amid trade restrictions on sensitive technology, China has ramped up efforts to make its economy self-reliant. This shift has put technology companies at the centrestage of the country\u2019s economic blueprint (the \u201c15th Five-Year Plan\u201d). This has implications beyond China.<\/p>\n\n\n\n

Chinese tech is going global. Tech companies in China have opted for the \u201copen source\u201d model, which shares its underlying code to hasten development, which differs from the more controlled and polished \u201cclosed source\u201d approach by the likes of OpenAI and Google.<\/p>\n\n\n\n

Chinese firms are powering 30% of all \u201copen source\u201d AI usage, according to research<\/a> by OpenRouter, an AI model aggregator, and venture capital firm Andreessen Horowitz. The report noted that \u201cChina has emerged as a major force, not only through domestic consumption but also by producing globally competitive models.\u201d<\/p>\n\n\n\n

The country is not just producing new models, but a new cohort of listed companies. AI-related businesses have dominated listings in Hong Kong, producing the busiest January ever for IPOs on the exchange there. Companies that went public came from across the AI value chain, from modelling and training to robotics and intelligent security.<\/p>\n\n\n\n

What\u2019s clear is that China\u2019s AI beneficiaries \u2013 what we\u2019re calling the \u201cbasket of tomorrow\u201d \u2013 have broadened meaningfully beyond chipmakers. Many are working on real-world applications made possible by AI, for example, in autonomous driving and humanoids. <\/p>\n\n\n\n

It\u2019s estimated<\/a> that the Chinese embodied AI robot market size could reach US$77 billion in 2030. The sector is rapidly moving from concept to commercial reality. Unitree, perhaps the most recognised robotics name in China, is building a $124 million factory targeting over $140 million of annual revenues.<\/p>\n\n\n\n

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That also means investors will have to cast a wider net, however. The latest leg of the rally has not come from the \u201cbig tech\u201d basket, the Hang Seng Tech Index, which has been weighed on by regulatory scrutiny. It has instead been powered by the \u201cSTAR\u201d 50 index, which hosts newer, nimbler tech firms with a focus on \u201chard\u201d tech. ETFs tracking both indices form parts of Syfe\u2019s China Growth Portfolio<\/strong><\/a>.<\/p>\n\n\n\n

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With China\u2019s AI capital expenditure projected to reach USD 330 billion by 2030, the \u201cbasket of tomorrow\u201d holds plenty of promise. For our clients in Singapore, there is an opportunity to catch a glimpse of the future on <\/strong>26 February <\/strong>2026 at the Syfe Market Outlook 2026<\/strong> event in Marina Bay Sands, where we will be showcasing Singapore\u2019s first \u201cInvestment Humanoid\u201d. <\/p>\n\n\n\n

Sign up <\/strong>here<\/strong><\/a>.<\/p>\n\n\n\n

Theme 3: Finding Value in \u201cBoring\u201d Companies<\/strong><\/h3>\n\n\n\n

Less exciting but equally important is rising \u201cshareholder return\u201d in China. Regulators have been encouraging cash-rich companies to return more of their \u201clazy\u201d capital \u2013 unused cash sitting on their balance sheets \u2013 to shareholders. <\/p>\n\n\n\n

This theme is in vogue for good reasons. China is shifting its focus from the velocity to the quality of economic growth. In some industries, leading companies\u2019 earnings growth outlook has become less appealing, as they go from seizing market share to defending it. Shareholders would only want to stick with them if the \u201ctotal return\u201d (capital appreciation, plus buybacks and dividends) is competitive enough with up-and-coming growth stocks.<\/p>\n\n\n\n

Some analysts see this as a \u201cculture shift<\/a>\u201d. The search for high-dividend stocks, in particular, has been egged on by falling Chinese bond yields, which have fallen as policymakers suppressed financing costs to boost growth. BBB-rated (the highest yielding \u201cinvestment grade) corporate bond yields are now lower<\/a> than blue-chip dividend yields.<\/p>\n\n\n\n

This is a multi-year story. Regulators have been encouraging shareholder returns to rise, in a bid to attract long-term capital to equities. We have seen this play out in Japan and Korea. Already, there are meaningful pick-ups in \u201cpayout\u201d ratios (proportion of the company\u2019s earnings paid to shareholders) and buybacks among state-owned enterprises in China. <\/p>\n\n\n\n

More \u201cnew economy\u201d companies will join the wave as they become the incumbents of their industries. Baidu, China\u2019s Google equivalent, paid dividends for the first time in February in its two decades as a publicly traded company.<\/p>\n\n\n\n

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Chart compiled by Allianz Global Investors.<\/em><\/p>\n\n\n\n

A Final Word: Beware Overheating the \u201cFire Horse\u201d<\/strong><\/h3>\n\n\n\n

In the Chinese zodiac, the dynamism of the \u201cfire horse\u201d could also lead to exacerbation. Likewise, extreme optimism could push share prices too fast, too far beyond their fair values, especially in a retail-driven stock market like China\u2019s. Regulators have stamped out speculation when trading got too hot, even at the cost of hurting market performance. This is why a \u201cslow bull\u201d market remains more probable than a euphoric run-up in Chinese equities this year.<\/p>\n\n\n\n

Many analysts still worry about the property market, which is responsible for plenty of GDP growth and has yet to find a floor. But policy is heading in the right direction, with more relaxation on home purchases trickling through. <\/p>\n\n\n\n

What\u2019s clear is that policymakers are not about to unleash the \u201cfire horse\u201d and reflate the property market, the overheating of which was the source of so much trouble. This is part of a broader rebalancing towards technology-led growth, which is constructive to sustaining long-term growth.<\/p>\n\n\n\n

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