Written by Romeo Kuok
The consensus is wrong. Again.
For the past three years, Western financial media has written the obituary of the Chinese stock market. We’ve heard the familiar chorus: an uninvestable market, a property sector in terminal decline, and a geopolitical environment too toxic for foreign capital. Yet, as we stand in the middle of 2026, the data tells a vastly different story.
My target for the Shanghai Composite Index (SHCOMP) by the end of 2026 is 6000.
I don’t make this call lightly. The last time the Shanghai Composite breached 6000 was in October 2007. It has been nearly two decades of false starts and shattered expectations. But the setup we are witnessing right now — a confluence of massive monetary stimulus, historic undervaluations, shifting global capital flows, and a booming AI sector — is the most potent cocktail for a mega-rally I have seen in my career.
Here is the conviction-driven, data-backed case for why the Shanghai Composite is not just a buy, but the trade of the decade.
The PBOC’s Liquidity Bazooka
You cannot fight the central bank. It’s a rule that Wall Street religiously applies to the Federal Reserve but conveniently ignores when it comes to the People’s Bank of China (PBOC).
Throughout 2025 and into 2026, the PBOC has fundamentally shifted its posture. The structural and tactical monetary stimulus injected into the system is staggering. We saw the initial pivot in late 2024 and early 2025 with the SFISF facility — a liquidity mechanism that channelled funds directly into equities via securities firms and insurers. But that was just the appetizer.
The PBOC has committed to a moderately loose policy for 2026, systematically lowering reserve requirement ratios (RRR) and injecting liquidity to ensure the 5.0% GDP growth target is met. This isn’t the targeted, piecemeal easing of the past decade. This is a coordinated, systemic liquidity flush designed to backstop the equity market and stimulate consumption. When the PBOC opens the spigots, the liquidity eventually finds its way into risk assets. A-shares are the primary beneficiary.
The Valuation Disconnect
Let’s talk about multiples. The disconnect between Chinese corporate earnings and their equity valuations is borderline absurd.
Despite the recent rally pushing the Shanghai Composite past 4100, the market remains fundamentally cheap relative to historical averages and global peers. We are looking at a market trading at a forward P/E below 15x — deeply discounting the earnings growth potential of China’s leading enterprises. While US tech stocks are priced for perfection, Chinese equities are priced for a depression that isn’t happening. J.P. Morgan recently upgraded their outlook, projecting earnings growth of 13% in 2026 and 14% in 2027 for Chinese equities. You are buying double-digit earnings growth at a discount. In any other market, this would be considered a generational value play.
Comparative Valuation: US Tech vs. Shanghai Composite
| Metric | US Tech (S&P 500 IT) | Shanghai Composite |
| P/E Ratio (Trailing) | ~35x+ | ~15x – 18x |
| Est. Earnings Growth | Maturing | 13–14% (2026–27) |
| Global Sentiment | Euphoric / Crowded | Skeptical / Under-owned |
The Great Capital Rotation
The smart money is already moving. We are at the beginning of a massive capital rotation from overpriced US technology stocks into cheap Chinese equities.
For years, global portfolios have been structurally underweight China. But the math is becoming impossible to ignore. As US tech giants face the law of large numbers and increasing regulatory scrutiny, capital is seeking yield and growth at a reasonable price. The world’s top institutional investors have been quietly accumulating Chinese equities, pushing holdings to multi-year highs.
This isn’t just foreign capital. The domestic retail investor — the sleeping giant of the Chinese stock market — is waking up. Retail sentiment, battered by the property downturn, is pivoting hard toward equities. When 1.4 billion people decide that the stock market is the best vehicle for wealth creation, the momentum is unstoppable.
The Trump-Xi Trade Deal Catalyst
The geopolitical overhang has been the primary excuse for avoiding China. That excuse evaporated with the Trump-Xi trade deal.
The agreement reached in late 2025 is a monumental de-risking event. China agreed to suspend retaliatory tariffs on a vast swath of US agricultural products and committed to purchasing at least 25 million metric tons of US soybeans annually through 2028. In return, the US suspended heightened reciprocal tariffs and eased export controls.
This de facto removal of controls stabilises the trade relationship and provides a predictable environment for corporate planning. The market hates uncertainty more than anything else. The Trump-Xi deal removed the tail risk of a spiralling trade war, clearing the runway for a sustained equity rally.
The Unpriced AI Boom
Finally, we must address the elephant in the room: Artificial Intelligence.
The Western narrative suggests that US companies have a monopoly on the AI revolution. This is demonstrably false. China’s tech titans — Alibaba, Tencent, Baidu, and ByteDance — are executing an aggressive, economy-first AI strategy.
Alibaba recently reported a 38% jump in AI and cloud revenue and pledged a massive $53 billion investment to quintuple its cloud and AI revenue to $100 billion annually. These companies are not just building foundational models; they are integrating AI into the fabric of the world’s largest digital economy — from e-commerce and logistics to autonomous driving and financial services.
The market has not fully priced in the productivity gains and revenue growth that this AI boom will generate for Chinese tech leaders. As these investments translate into bottom-line profits, the rerating of these mega-caps will drag the broader index higher.
The Path to 6000
The Shanghai Composite at 6000 is not a pipe dream; it is a mathematical probability given the current inputs.
We have a central bank committed to liquidity, valuations that are historically depressed, a massive rotation of global and domestic capital, a stabilised geopolitical landscape, and a booming AI sector driving future earnings.
The setup is reminiscent of 2007, but the foundation is significantly stronger. The Chinese economy of 2026 is more mature, more technologically advanced, and more resilient.
The crowd is still fighting the last war, focused on the property sector and historical grievances. The smart money is looking at the data. The data says the Shanghai Composite is going to 6000. Don’t get left behind.
The views expressed in this op-ed are those of Romeo Kuok and do not constitute investment advice. Past performance is not indicative of future results.
