JPMorgan: A-Share Valuations Still Low, 10%-15% Upside Expected
nashnova research
J.P. Morgan's latest report says MSCI China and the CSI 300 sit only 8%-10% above their Sept-24 trough, projecting a further 10%-15% rally; Goldman Sachs confirms global fund allocation to China has dropped to a five-year low.
Where does the upside come from?
Even after November 4's sharp rally, MSCI China and the CSI 300 are only 8%-10% above the September 24 low — the valuation recovery is far from done.
J.P. Morgan cites three drivers: U.S. midterm election risk clearing, a deep reset in positioning and valuations, and the national team stepping in to backstop the market.
This means → the bounce is not a single-day sentiment spike but a window where three forces are releasing at once.
The bank keeps its A-shares over H-shares preference and reiterates its bullish call on tech and broker stocks.
How far has positioning reset?
Margin financing balances fell from RMB 3 trillion in June to roughly RMB 2.3 trillion, back to September 2025 levels — this year's leverage build-up is largely unwound.
Northbound capital's A-share IT-sector exposure dropped from 35% at end-June to 27% at end-September.
Among the top-ten holdings of onshore mutual funds, IT weighting fell from about 60% in June to 48% in September; J.P. Morgan estimates it slipped further to roughly 40% in October.
In plain terms = the "crowded trade" in tech has thinned out sharply, freeing up sidelined capital to re-enter.
How underweight is the world on China?
Goldman Sachs data show global active-fund allocation to China has fallen to 5.5% — the 6th percentile since 2015.
That is roughly two-thirds below the ~15% peak allocation in 2020, and 215 basis points below benchmark.
This means → global underweighting is near an extreme; even a modest improvement could trigger inflows.
What is the national team doing?
In October alone, the national team net-purchased RMB 330 billion of ETFs.
Second-half ETF inflows now equal 35% of the first-half net outflow, leaving roughly RMB 900 billion in potential "dry powder" — capital available for further buying.
J.P. Morgan characterizes the PBoC and CSRC backstop signals as "not a bazooka, but a firmer floor."
In plain terms = policy is not trying to blast the market higher — it is making sure the market cannot fall further.
Global AI trade wobbling — what does it mean for China?
Texas accounts for more than 25% of planned U.S. data-center capacity through 2030, and the state's incoming administration has signaled tighter restrictions on new builds.
Goldman's China AI basket (GSXACADO) has seen its forward P/E compress from a July peak of about 53× to roughly 25×, back to pre-rally levels before the summer 2025 AI run.
This means → cracks in the global AI trade could drive capital rotation from the U.S. AI chain into Chinese assets, while Chinese AI names have already re-priced sharply, restoring their value appeal.
What are investors focusing on now?
J.P. Morgan's Hong Kong and Singapore roadshow feedback: most investors agree downside is limited once the policy floor is in place.
Offshore investors show stronger willingness to add exposure; focus is broadening from AI toward banks, healthcare, and high-shareholder-return consumer names.
This reflects a shift from "betting on a single theme" to "hunting for valuation pockets" — whether the recovery can sustain depends on the persistence of national-team flows and the pace of follow-through policy.
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