Chen Guo urges A-share buying after 300-point pullback from 4,259

East Money Securities' chief strategist calls the A-share index's retreat from 4,259 a buying opportunity, predicting upside will far exceed downside over the next quarter.

The benchmark A-share index's roughly 300-point slide from its 4,259 peak has created a strategic entry point for Chinese equities, with the gauge now trading near 3,960, according to East Money Securities' chief strategist.

"Strategically, we can no longer be bearish on A-shares regardless of external turbulence," Chen Guo, chief strategist at East Money Securities, said. "Over the next quarter, the upside potential for the index will far exceed the downside risk."

The index has shed roughly 7% from its recent high of 4,259, a pullback that erased gains accumulated during the prior rally phase. The retreat comes as global trade uncertainty rises and mixed economic signals emerge from China's post-pandemic recovery, though domestic retail participation has remained resilient with daily turnover averaging above 1 trillion yuan.

Chen's call carries weight given East Money Securities' position as one of China's largest retail brokerage platforms, where its research influences millions of individual investors. If his bullish thesis plays out, the index would need to reclaim and sustain above 4,259 within the next three months — a move that would require both policy support from Beijing and a stabilization in foreign capital flows via Stock Connect, which saw net outflows of roughly 50 billion yuan in the past month.

The strategist's optimism contrasts with the cautious stance adopted by several global investment banks, which have trimmed their China equity allocations as deflationary pressures persist and the property sector downturn continues. The CSI 300 Index, tracking the largest A-share listings, has mirrored the broader index's trajectory, falling approximately 8% from its January peak.

A Contrarian Call With Policy Support

Chen's bullish positioning hinges on several potential tailwinds. The People's Bank of China has maintained an accommodative monetary stance, with the 1-year medium-term lending facility rate held at 2.0% after a 25-basis-point cut in September. Market expectations for additional easing remain elevated, with swap markets pricing in a further 10 to 15 basis points of rate reductions by mid-year. A PBoC move could simultaneously support equity valuations and weaken the offshore yuan, with USD/CNH trading near 7.25 — a level that historically has coincided with increased A-share buying by state-backed funds.

The Hang Seng Index in Hong Kong, which often trades in sympathy with A-shares, has also pulled back from its 2025 highs, declining roughly 5% over the same period. A sustained A-share recovery could spill over into Hong Kong-listed Chinese tech stocks, which have been under pressure after renewed US-China technology restrictions.

For global investors, Chen's call represents a high-conviction bet that China's policy support cycle and relatively cheap valuations — the CSI 300 trades at roughly 12 times forward earnings, below its five-year average of 13.5 times — will outweigh near-term headwinds from trade tensions and domestic deflation. The next three months will test whether the strategist's optimism is prescient or premature, with the key data points being March's Caixin manufacturing PMI, due early next month, and any signals from the annual Two Sessions parliamentary meetings in March.

This article is for informational purposes only and does not constitute investment advice.