National Team buying supported the rebound in Chinese markets, while HKEX relaxed WVR listing requirements

Overview

This report is Goldman Sachs's weekly China market update, with a core focus on the short-term rebound in Chinese equities driven by policy support, National Team buying, and fund flows. The report covers A shares, H shares, offshore Chinese equities, Southbound flows, mutual fund positioning, earnings revisions, valuations, style performance, and macro policy news.

Core views

The report's core views are as follows: first, MXCN and CSI300 rose 0.9% and 2.7% this week, respectively, with the rebound linked to inflows into National Team-related ETFs, increased holdings by SOEs, commitments from insurers to raise allocations, and stabilizing statements from regulators; second, HKEX relaxed listing requirements for WVR companies, which may improve the financing and listing environment for some new economy companies; third, H shares may slightly outperform A shares over the next three months; fourth, while allocations to China by active funds have improved, global active funds remain on average underweight China by about 240bp; fifth, the market is not experiencing a broad-based risk-free rally, and external tariffs, policy stance, declining real estate-related income, and sector earnings divergence remain key constraints.

Analysis framework

The report adopts a weekly market monitoring framework, combining index performance, sector and style returns, ETF fund flows, Stock Connect flows, active fund positioning, earnings revisions, valuation percentiles, the A-H rotation model, news-text-based policy proxy indicators, and a geopolitical barometer to assess market conditions.

Methodology notes

• Fund flows and market interventionNational Team Trackers

  Tracking fund flows into National Team-favored ETFs

  By tracking net inflows into the top ten ETFs favored by the National Team, the report assesses whether policy-driven capital has resumed entering the market; it shows net inflows of about Rmb100bn over the past two weeks.

• Relative return modelA-H rotation model

  Assessing rotation between A shares and H shares

  Goldman Sachs's model shows that H shares may slightly outperform A shares over the next three months, and it is used to judge relative allocation between onshore and offshore Chinese equities.

• Policy text analysisPOE Regulation Proxy

  Private enterprise regulatory policy proxy indicator

  A policy proxy indicator constructed from news text mining in sectors with higher private enterprise weights; the latest reading shows the policy environment for private enterprises is in a slightly restrictive range.

• Sentiment indicatorA-share Retail Sentiment Proxy

  A-share retail sentiment proxy indicator

  The revised A-share retail sentiment proxy indicates that current sentiment is not yet excessively stretched compared with previous periods of strong sentiment.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MSCI China

  Core index for offshore Chinese equities

  Strengths

  Valuation remains relatively observable, with a 12-month forward P/E of 10.5x; some sectors such as materials and insurance showed strong weekly performance.

  Weaknesses

  Year-to-date performance remains under pressure, with weaker performance in media entertainment, retail, consumer services, and other sectors.

  Comparison

  Compared with CSI300, this week's gain was smaller, but the A-H rotation model suggests H shares may slightly outperform A shares over the next three months.

  Risks

  External tariffs, U.S. dollar liquidity, continued underweight positioning in China by global active funds, and changes in expectations around platform economy and private enterprise regulation.

• CSI300

  Core large-cap onshore A-share index

  Strengths

  Rebounded 2.7% this week, earnings revision style outperformed, and 2026E EPS growth expectations are relatively high.

  Weaknesses

  The 12-month forward P/E is 14.8x, higher than MSCI China; real estate and small-cap styles lagged.

  Comparison

  Short-term gains were stronger than MXCN, but the model suggests H shares may slightly outperform A shares over the next three months.

  Risks

  Marginal policy tightening, pressure on the real estate chain, retail sentiment volatility, and sector earnings divergence.

• H shares / China offshore equities

  Offshore Chinese equities and Hong Kong market

  Strengths

  Southbound inflows have been strong year to date, and HKEX's relaxation of WVR listing requirements may improve the listing environment for new economy companies.

  Weaknesses

  Some offshore growth and New China styles lagged, and overseas investors remain underweight China.

  Comparison

  The A-H rotation model indicates that H shares may slightly outperform A shares over the next three months.

  Risks

  Overseas risk appetite, U.S. dollar interest rates, geopolitical relations, and cross-border regulatory policy.

• National Team favorite ETFs

  Observation window for policy-driven capital

  Strengths

  Net inflows of about Rmb100bn over the past two weeks indicate that policy support may be resuming.

  Weaknesses

  Fund flows do not necessarily imply an improvement in fundamentals, and sustainability still needs to be monitored.

  Comparison

  Since 2018, the National Team's intervention approach has been more ETF-focused rather than direct single-stock holdings.

  Risks

  If subsequent ETF inflows slow, market expectations for policy support may decline.

Key data

• MXCN weekly performance0.9%The report states that MXCN rebounded 0.9% this week.
• CSI300 weekly performance2.7%The report states that CSI300 rebounded 2.7% this week.
• Two-week net inflows into top ten National Team-favored ETFs约Rmb100bnUsed to signal the resumption of National Team buying.
• Estimated scale of National Team holdings in A shares and ETFs约Rmb5tnEquivalent to about 5% of total A-share market capitalization.
• MSCI China 12-month forward P/E10.5xSummary data from the valuation page.
• CSI300 12-month forward P/E14.8xSummary data from the valuation page.
• MXCN 2026/2027E EPS growth17%/17%I/B/E/S consensus expectations.
• CSI300 2026/2027E EPS growth25%/15%I/B/E/S consensus expectations.
• Southbound funds inflow this weekUS$0.4bnSummary data from the report.
• Year-to-date Southbound funds inflowUS$49bnSummary data from the report.
• Global active fund allocation to China5.6%As of June 2026, the share of China assets held by global active funds.
• Global active funds' underweight to China versus benchmark约240bpThe report says they are underweight relative to their respective benchmarks on average.

Impact & implications

In terms of investment implications, National Team-related fund flows and policy support statements help improve short-term risk appetite, while earnings revisions are relatively stronger in materials, financials, and information technology, and H shares show signals of mild outperformance versus A shares; however, if external tariff pressure, marginal policy tightening, or deterioration in real estate fundamentals continues, the sustainability of the rebound and its spread across sectors will still need to be validated.

Risks

• New 10%-12.5% tariffs imposed by the U.S. USTR under Section 301 on multiple trading partners may affect global trade and risk appetite.
• The marginal policy stance toward the equity market and private enterprises may tighten, and the policy proxy indicator in the report shows some restrictive signals.
• Further contraction in land sale revenue means pressure remains on the real estate chain and local government finances.
• Although global active funds have increased exposure to China, they remain underweight by about 240bp relative to benchmarks, and the strength of foreign inflows remains uncertain.
• There is clear divergence in sector performance and earnings revisions, with real estate, communication services, New China style, and some consumer sectors still relatively weak.
• Oil prices rising above US$100/bbl could increase cost pressures and affect inflation and policy expectations.

What to watch

• Whether National Team-favored ETFs continue to record net inflows, and whether inflows broaden from large-cap ETFs to ChiNext- and STAR Board-related names.
• Whether subsequent market-stabilizing policies from the CSRC, as well as increased holdings by SOEs and insurers, are implemented and sustained.
• Potential listing applications and financing activity among new economy companies following the relaxation of HKEX's WVR listing requirements.
• The direction of earnings revisions for MSCI China and CSI300, especially in financials, information technology, materials, and real estate.
• The pace of Southbound net inflows and related allocation changes in heavyweight names such as Alibaba, Tencent, CNOOC, and Kuaishou.
• Whether global active fund positioning in China continues to recover and narrows the underweight relative to benchmark.
• The impact of U.S. tariffs, oil prices, the RMB exchange rate, and the China-U.S. relations barometer on market risk appetite.