In-Depth Analysis of the Impact of Coordinated Reforms in China's Stock, Bond, and Futures Markets on Investors' Asset Allocation Strategies and the A-Share Market Valuation System

The CSRC’s 2026 System Work Conference clearly proposed to focus on “continuously improving the quality and efficiency of services for high-quality development” as the core, centering on the work theme of “preventing risks, strengthening supervision, and promoting high-quality development”, and systematically advancing the comprehensive reform of capital market investment and financing [1][2]. The conference deployed five key tasks, and the content directly related to the coordinated reform of the stock, bond, and futures markets includes:

A prominent feature of this reform is the emphasis on “coordinated development” rather than isolated reform of a single market. Market insiders believe that through the coordinated development and institutional innovation of the stock, bond, and futures markets, we can better serve national strategies and the requirements of the real economy, and promote the capital market reform to advance systematically in deeper and broader dimensions [1].

Since 2024, domestic interest rates have continued to decline, forming a macro environment of “low interest rates and loose monetary policy”, which is profoundly reshaping the risk-return ratio of stock and bond assets [3][4]. The main manifestations are:

The bond allocation strategy is undergoing a fundamental transformation:

• Traditional Model
  : Hold-to-maturity strategy
• New Model
  : Dominated by coupon strategy, focusing on medium and short-duration allocation
• Duration Strategy Contraction
  : New allocations are mainly 3-5 year term, avoiding the risk of long-end interest rate rebound

Zhang Yu from Hua Chuang Securities pointed out that 2026 will be the first year of the awakening of China’s stock market allocation value. The difference in the Sharpe ratio between stocks and bonds reversed in the second half of 2025, and is currently at the 70th percentile level of the past decade, meaning the relative allocation value of stocks has not yet been fully priced in [3].

The low-interest rate environment brings dual benefits to equity assets:

1. Lower Discount Rate
   : Reduces the valuation discount rate of equity assets and lifts the valuation center
2. Relative Cost-Effectiveness
   : High-dividend assets become “bond-like substitutes”

According to market research and analysis, the following changes are taking place in investors’ asset allocation structure:

The yield of money market funds represented by Yu’E Bao has fallen sharply, facing the test of “breaking 1%”, and the persistently low yield level cannot meet residents’ allocation needs [4]. Against this background:

• As a transitional product from fixed income to equities, “Fixed Income +” products have absorbed a large amount of allocation demand from residents’ ‘deposit migration’
• After the rapid development of “Fixed Income +” in 2025, it is expected to continue to grow rapidly in 2026
• Sales agencies regard “Fixed Income +” as a key direction for marketing and revenue generation

Citic Construction Investment Research pointed out that against the background of the decline in broad-spectrum interest rates, with a large amount of time deposits maturing in 2026, the re-allocation demand from residents’ ‘deposit migration’ will become the largest marginal increment in the market [4].

Lin Chengwei from Zheshang Securities believes that from the perspective of capital increment, the residents’ deposit migration in 2025 “is just the beginning”, and it is expected that this trend will continue in 2026 [5].

• Sectors with low valuation quantiles and high dividend yields
  : Insurance, home appliances, white liquor, city commercial banks
• Favorable exports and rising bond interest rates
  : Home appliances and insurance may start earlier than white liquor and growth sectors

• Opportunities for improved supply-demand balance
  : Fields with high capacity utilization quantiles and low capital expenditure ratios
• Representative Sectors
  : Ferrous metals, oil and gas, general electronic equipment

On November 21, 2022, Yi Huiman, Chairman of the CSRC, first proposed “exploring the establishment of a valuation system with Chinese characteristics” at the Financial Street Forum Annual Meeting [6][7]. The core connotation of this concept includes:

1. Highlighting “People-Oriented”
   : Recognize the value of business models that benefit the interests of more people and are conducive to shared development
2. Emphasizing “Coordination and Sustainability”
   : Highlight support for green and sustainable development fields
3. Supporting “Security and Development”
   : Tilt resources towards fields that can better integrate into the overall national security situation and the construction of a modern industrial system

Traditional valuation models focus on financial factors on the numerator side, especially variables such as profits and cash flows. The new valuation system needs to:

As of February 2024, there are 1,405 state-owned listed companies in the A-share market, accounting for 27% of the total number of listed companies (5,166), but the market value of central and state-owned enterprises accounts for as high as 46.60% of the total A-share market value, nearly half [6][7].

However, the valuation level of central and state-owned enterprises has been low for a long time:

• The overall valuation level of the CSI Central and State-Owned Enterprises Index is lower than that of private enterprises
• The average price-to-earnings ratio (P/E) of central enterprises is less than 8 times, the lowest level in the past decade
• The average P/E ratio of state-owned listed companies in the financial industry is only 6.29 times

1. SOE Reforms Stimulate Endogenous Motivation
   :
   • The new SOE reform plan targets the improvement of core competitiveness
   • Drive the value creation capacity of central enterprises through technological innovation

2. Market Value Management Enhances Market Recognition
   :
   • Establish a multi-level positive interaction mechanism to convey corporate value
   • Appropriately use means such as share repurchases, increases, and reductions to guide the reasonable return of corporate value

3. “One Profit, Five Ratios” Operational Indicator System
   :
   • Ensure that the growth rate of total profits is higher than the national GDP growth rate
   • Keep the asset-liability ratio generally stable
   • Improve return on equity (ROE), R&D investment intensity, labor productivity per employee, and operating cash flow ratio

With the establishment of the valuation system with Chinese characteristics, the investor structure will continue to optimize:

The increase in the proportion of institutional investors will drive significant changes in valuation concepts, with greater emphasis on the medium- and long-term value of enterprises [6].

The establishment of the valuation system with Chinese characteristics will:

1. Improve the scientificity and effectiveness of valuation pricing
2. Gradually improve the valuation and pricing logic adapted to different types of enterprises
3. Better exert the resource allocation function of the capital market
4. Guide more efficient allocation of resources to key areas of the real economy

The CSRC’s 2026 Work Conference emphasizes the coordinated development of the stock, bond, and futures markets, which is mainly reflected in the following aspects:

The coordinated development of the market will promote the rational flow of capital among the stock, bond, and futures markets:

• Risk Hedging
  : The improvement of the futures market provides risk hedging tools for stock investment
• Income Enhancement
  : Bond investment returns provide a safety cushion for equity investment
• Asset Allocation
  : Multi-market allocation reduces portfolio volatility

1. Policy Risk
   : Frictions in major country relations or overseas economic and trade relations may experience twists and turns
2. Liquidity Risk
   : Changes in global monetary policy may affect cross-border capital flows
3. Valuation Volatility
   : The pace of valuation repair may fall short of expectations
4. Inflation Risk
   : Marginal changes in inflation expectations may affect the bond market

1. Transformation of Asset Allocation Strategies
   : In a low-interest rate environment, the traditional fixed income allocation model is unsustainable, the allocation value of equity assets has significantly increased, and “Fixed Income +” products and residents’ ‘deposit migration’ will become the main sources of incremental capital.

2. Valuation System Restructuring
   : The establishment of the valuation system with Chinese characteristics will change the traditional single profit-oriented valuation logic, with the weights of factors such as policy orientation, ESG, shareholder returns, and security attributes increasing, and the valuations of central and state-owned enterprises are expected to experience a systematic re-rating.

3. Coordinated Market Development
   : The coordinated reform of the stock, bond, and futures markets will promote multi-market product innovation and rational capital flow, providing investors with richer allocation tools and risk hedging methods.

4. Evolution of Investment Styles
   : In 2026, the A-share market is expected to present a structural market intertwined with low-volatility dividends and technological growth. Investors should choose appropriate allocation strategies based on their risk preferences.

• Allocation-Oriented Capital
  : Focus on low-valuation, high-dividend sectors (insurance, home appliances, city commercial banks), combined with favorable export trends and rising interest rates
• Game-Oriented Capital
  : Focus on fields with improved supply-demand balance and high capacity utilization (ferrous metals, oil and gas, general electronic equipment)
• Long-Term Capital
  : Actively lay out the technological growth theme (semiconductors, high-end equipment, new materials), and seize the re-rating opportunities of central and state-owned enterprises under the valuation system with Chinese characteristics

Looking ahead to 2026, with the in-depth advancement of capital market reforms and the emergence of multi-market synergy effects, China’s capital market is expected to usher in a new round of development opportunities. Investors should closely follow policy trends, seize the allocation opportunities brought by reforms, and pay attention to risk management to achieve steady appreciation of assets.

[1] Securities Times - “Coordinated Reforms in Stock, Bond, and Futures Markets Improve the Quality and Efficiency of Services for High-Quality Development” (https://www.stcn.com/article/detail/3600965.html)

[2] China Securities Regulatory Commission - “China Securities Regulatory Commission Holds 2026 System Work Conference” (https://www.csrc.gov.cn/csrc/c106311/c7609372/content.shtml)

[3] Zhang Yu, Hua Chuang Securities - “2026 Will Be the First Year of Awakening of China’s Stock Market Allocation Value” (https://wallstreetcn.com/articles/3761990)

[4] Citic Construction Investment - “2026 A-Share Capital Market Outlook” (https://app.dahecube.com/nweb/news/20260115/259571n426de20d43e.htm)

[5] Lin Chengwei, Zheshang Securities - “Exclusive Interview with Lin Chengwei, Chief Macro Analyst of Zheshang Securities: The A-Share Market Will Still Be in a Slow Bull Market in 2026” (https://www.21jingji.com/article/20260115/herald/48fd2a93f68a34c8823bebc430197183.html)

[6] Huaxi Securities - “The Road to SOE Re-rating Under the Valuation System with Chinese Characteristics” (https://pdf.dfcfw.com/pdf/H3_AP202301031581669862_1.pdf)

[7] Chinese Social Sciences Network - “Difficulties in Building a Valuation System with Chinese Characteristics: Undervaluation of State-Owned Enterprises” (http://ie.cssn.cn/kygz/kycg/lw/202411/W020241129360176030771.pdf)