China's Capital Market Builds Momentum Toward a Resilient "Slow Bull"

Guosen Securities Co., Ltd., one of China's leading comprehensive investment banks and securities firms, observes that the country's capital market is entering a new phase of stability and resilience, characterized by what the firm describes as a "slow‑bull" trend.According to Guosen Securities, the convergence of ample liquidity, supportive policies, and improving economic fundamentals is laying the groundwork for a market that grows steadily rather than through sharp swings. This gradual upward trajectory, the firm notes, reflects the increasing maturity of China's financial system and its capacity to support long‑term, high‑quality growth.From Guosen's perspective on funding dynamics, the rally in A‑shares since the start of this year—particularly since July—has been largely driven by institutional investors. In September, the issuance of policy‑based financial instruments reached RMB 500 billion, with accelerated deployment into key projects helping to stabilize market expectations and boost investor confidence. Guosen Securities points out that corporate sentiment has improved noticeably, reinforcing the foundations of this emerging "slow‑bull" market pattern.Liquidity Strengthens as Institutional Funds Take the LeadOne of the most significant drivers of this trend is liquidity. Guosen Securities highlights that institutional funds are becoming the dominant force in the market, replacing the traditional retail-driven dynamic. The balance of institutional capital—including wealth management, trusts, insurance, and asset management products—has now surpassed RMB 100 trillion. Despite this massive pool of funds, equity allocations remain at historically low levels, suggesting ample room for growth.Since July, the rise in A-shares has been largely propelled by institutional inflows. By August 2025, new institutional stock accounts reached nearly 10,000, the highest level since 2022. The fund market shows similar patterns: after a brief surge in new accounts last October, numbers have stabilized, underscoring that the current rally is not speculative but grounded in steady institutional participation.Policy initiatives are reinforcing this trend. In January 2025, regulators introduced the "Implementation Plan for Promoting Medium- and Long-Term Funds into the Market." The plan sets clear targets: public funds' holdings of A-share circulating market value will grow by 10% annually over the next three years, while 30% of new insurance premiums each year will be directed into equities. Analysts believe these measures enhance certainty and confidence, encouraging other institutional players such as wealth managers and trust companies to follow suit.Policy Support: Stability Over Aggressive StimulusPolicy stability is another cornerstone of the slow bull narrative. While the U.S. Federal Reserve resumed interest rate cuts in September, China chose not to follow suit, maintaining independence in its monetary policy. The 7-day reverse repo rate remains at 1.4%, the one-year Loan Prime Rate (LPR) at 3%, and the five-year LPR at 3.5%. This cautious approach emphasizes continuity and stability, while providing targeted support for sectors such as technology innovation, consumption, small and micro enterprises, and foreign trade.Rather than relying on aggressive easing, policymakers are adopting precise, sustainable measures to support the economy. Fiscal policy is also playing a role. In September, new policy-based financial instruments worth ¥500 billion were introduced, reinforcing market confidence. Guosen Securities notes that the current policy mix prioritizes structural optimization and long-term stability. Measures to attract medium- and long-term funds, improve the ecosystem of listed companies, and enhance market appeal are being rolled out, providing a solid institutional foundation for the "slow bull".Fundamentals Improve: Signs of Economic RecoveryEconomic fundamentals remain the ultimate determinant of market direction. According to Guosen Securities, while challenges persist, corporate expectations are showing signs of improvement. The Producer Price Index (PPI) is approaching an upward turning point, often signaling profit recovery for companies and renewed vitality across industrial chains.A key development is the implementation of "anti-involution" policies in 2025. These measures target industries plagued by overcapacity, such as steel, coal, building materials, and photovoltaics. Through mechanisms of law and market, authorities are enforcing capacity controls, eliminating outdated production, and encouraging mergers and acquisitions. Guosen Securities believes these steps will improve industry concentration and efficiency, boosting profitability expectations.The "Slow Bull" Pattern: the stability and resilience of the capital marketThe combined effect of liquidity, policy, and fundamentals is creating the conditions for a "slow bull" market. Unlike past rallies driven by short-term speculation, this trend is characterized by medium- to long-term investment and institutional leadership.Guosen Securities argues that this shift will enhance the resilience of the capital market. With mid-long term funds steadily flowing in, policies advancing cautiously, and fundamentals improving, the capital market is better positioned to withstand volatility, which also plays a more important role in supporting sustainable economic growth.Outlook: A Market Anchored in ConfidenceLooking ahead, analysts expect the "slow bull" to continue shaping China's capital market. The emphasis on medium and long-term funds, coupled with structural reforms and targeted policy support, suggests that growth will be gradual but durable. For investors, this means clearer expectations, more controllable fluctuations, and a stronger link between market performance and real economic progress.The "slow bull" is not about dramatic surges or speculative bubbles. Instead, it represents a market that grows steadily, anchored in confidence and resilience. As Guosen Securities concludes, the capital market is shifting from short-term gamesmanship to long-term value creation, from retail-driven momentum to institutional leadership. In this transformation lies the promise of a more stable and mature financial system—one that can support China's broader goals of economic transformation and high-quality development.SOURCE Guosen Securities

China's Capital Market Builds Momentum Toward a Resilient "Slow Bull"

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