On Wednesday, the A-share market experienced a significant surge, with the Shanghai Composite Index rising over 1% to hit a new high for the year. This impressive performance has sparked discussions about the sustainability of the upward trend.
By the close of trading on June 25, the Shanghai Composite Index had gained 1.04%, reaching 3455.97 points—a new annual peak. The STAR 50 Index saw an increase of 1.73%, while the Shenzhen Component Index rose by 1.72%. The ChiNext Index outperformed with a substantial jump of 3.11%.
Trading volume across the two exchanges reached 1602.8 billion yuan, marking an increase of 188.2 billion yuan from the previous session.
What Drove the Market Rally?
Multiple factors contributed to the heightened market sentiment on Wednesday. Several public fund managers pointed to improving risk appetite and specific event-driven catalysts.
The leading sectors in this rally were non-bank financials, defense, and computer industries. Key drivers included marginal improvements in the international market environment, a ceasefire agreement between Iran and Israel, and the approval for Guotai Junan International to provide cryptocurrency trading services. These developments have created an environment where the A-share market is expected to remain active.
From Recovery to Powerful Breakthrough
China Asset Management described the week's market performance as a transition from "repair" to "powerful breakthrough." They noted that Monday and Tuesday's gains primarily reflected recovering risk appetite following the resolution of overseas conflicts, combined with a solid foundation for index rebound.
"After two consecutive days of gains, the赚钱效应 (money-making effect) and risk appetite improved, making investors more sensitive to positive news," China Asset Management explained. "Wednesday's market action combined these favorable factors for a powerful breakthrough. The news that a Hong Kong-based Chinese securities firm obtained the first comprehensive license for virtual asset-related trading services—coupled with recent high interest in stablecoins—ignited the securities and fintech sectors, leading the indices higher again."
They further distinguished between two types of news-driven market movements: those that trigger immediate sharp rises and those, like Wednesday's, where the market gradually climbs throughout the day. The latter indicates broader recognition and diffusion of positive news, underpinned by gradually improving risk appetite and a naturally recovering market rhythm.
On June 25, Guotai Junan International (01788.HK) announced its approval to provide virtual asset trading services. This news caused the company's stock to surge by 198% in a single day and spurred a collective rise in Chinese brokerage stocks. Meanwhile, the Hong Kong Securities ETF (513090) recorded historic volume, with turnover exceeding 27 billion yuan for the first time since its listing. It closed up 8.51%.
Improved Risk Appetite and Global Factors
Bosera Funds analyzed that the confirmation of a ceasefire agreement between Iran and Israel on Tuesday significantly eased market避险情绪 (risk-aversion sentiment). Simultaneously, the Federal Reserve unexpectedly sent dovish signals, suggesting a potential rate cut next month if inflation remains controlled. This alleviated concerns about global liquidity tightening and directly benefited funding conditions in emerging markets.
Both domestic and international information pointed toward improved risk appetite, with A-share trading volume noticeably expanding over the past two days.
China Europe Fund similarly noted that the rapid easing of Middle East tensions and optimistic global investor sentiment drove short-term strength in international markets this week. However, uncertainties regarding tariffs and growth persist without significant progress, and domestic high-frequency industry data has yet to show the improvement the market expected. The market might be reacting to the short-term消退 (fading) of overseas risks, creating another potential trend opportunity.
Pu'an Sheng Fund added that the "Guiding Opinions on Financial Support to Boost and Expand Consumption" issued by six departments explicitly encouraged financial institutions to provide loan support to the education sector, focusing on vocational education, skills training, and other non-academic institutions. This led to sharp gains in education stocks, exemplified by New Oriental, and a generally positive performance in the Hong Kong consumption sector.
"While the market has largely priced in most potential changes, including consensus on the global economic outlook and shifts in international capital flows, significant uncertainties remain beneath the surface of globally optimistic trading sentiment," cautioned China Europe Fund. They warned that as expectations gradually converge yet still fail to fully align with fundamentals, this consensus could enter a long-tail phase, necessitating caution regarding potentially increased market volatility in the second half of the year.
Overall, China Europe Fund suggested that considering domestic strong policy expectations and a better liquidity environment for Asia-Pacific emerging markets amid a weak dollar and international capital focus, domestic equity assets might outperform overseas markets in the second half.
The Outlook for the Second Half of the Year
With just three trading days left before A-shares enter the second half of 2025, many funds maintain a neutral to optimistic outlook.
Fundamental and Policy Support
From a fundamental perspective, Yongying Fund stated that as steady growth policies continue to take effect, with accelerated infrastructure investment落地 (implementation) and consumption stimulus policies showing results, the macroeconomy's trend toward stabilization and recovery is clear. Industrial enterprise profits are expected to enter a repair cycle in the second half.
On the policy front, capital market reform dividends are continuously being released. Measures including放宽 (easing) the比例 (ratio) for insurance capital entry into the market, optimizing dividend and回购 (buyback) systems, and improving delisting mechanisms will significantly enhance the A-share market ecology.
Regarding funding, against the backdrop of maintaining capital market stability as a clear policy goal, policy funds have a strong willingness to provide a bottom support, making the probability of significant market adjustments relatively limited.
Key Validation Point and Sector Opportunities
Xinyuan Fund believes that with increasing overseas rate cut expectations, stable domestic economic fundamentals, and repaired market risk appetite, the short-term downside risk for A-shares is small. Various event-driven factors will fuel sector rotation. "A trend性上涨 (trend rise) in the equity market requires sustained improvement after全A盈利 (all-A profit) touches bottom. Second-quarter earnings will be an important验证性拐点 (validation inflection point)."
In the context of an "asset shortage" due to low absolute levels of the risk-free rate, Shangyin Fund believes the A-share market is likely to stay active. Structurally, they emphasize several opportunities:
- Large Financial Sector: Under-allocated by public funds with remaining valuation repair space.
- Scarce Resources Sector: Generally low valuations, offering safety margins and strategic value amid global turbulence.
- Domestic Rise Segments: Areas gaining market share or experiencing upward景气 (sentiment) due to domestic advancement, such as innovative drugs, military, service consumption, media, and AI.
"The securities sector offers relatively obvious investment value," said Feng Chencheng, manager of the Huabao CSI Full Index Securities ETF. He noted that as Hong Kong推进 (advances) policies like stablecoin adoption, trading is one area where brokers can quickly get involved. Other major Chinese brokers are likely to follow suit.
"With Hong Kong market activity continuing to increase, enhancing its strategic position as an offshore financial center, stablecoin innovation represents a significant window. International business lines at securities firms have gained a new incremental window for business expansion," Feng explained. "While the near-term earnings visibility for innovative businesses is weak, policy catalysis provides valuation uplift potential for brokers with strong overseas business competitiveness in the long run."
Yongying Fund is focusing on two types of assets:
- New Quality Productive Forces: High elasticity areas, including new industries from 0 to 1 (e.g., AI, biopharma, new materials) and emerging industries transitioning from 1 to 10 (e.g., new energy, smart driving, energy conservation, high-end manufacturing).
- Stable Operations: Industries with robust development, focused core businesses, reasonable goal and asset structure management, and attention to shareholder returns (e.g., leaders in hydropower, nuclear power, internet, oil petrochemicals). These are less affected by Euro-American economic衰退 (recession) and act as stabilizers for China's economic development.
China Europe Fund is relatively optimistic about stable dividend-yielding stocks and more细分 (niche) tech growth within the technology sector, believing a refined barbell strategy combining these two offers shock-resistant properties. Domestically-oriented financial cycles may possess better fundamental stability against global uncertainties and positive sector expectations due to ongoing policy support.
Bosera Fund mentioned that subsequent attention should still be paid to Sino-US economic and trade博弈 (games) and the resilience of domestic fundamentals under the influence of external demand. As July enters the mid-year report disclosure period, the market may still exhibit震荡态势 (volatile trends). Allocations could focus on a tech + dividend barbell structure and directions with improving earnings.
Frequently Asked Questions
What caused the recent surge in the A-share market?
The rally was driven by improved risk appetite, event catalysts like a Middle East ceasefire, dovish Fed signals, and regulatory approvals for new financial services like virtual asset trading. These factors combined to boost investor confidence and trading volume. 👉 Explore more strategies for understanding market trends
Can the upward trend in A-shares continue throughout the year?
Many fund managers are cautiously optimistic for the second half, citing policy support, improving fundamentals, and a favorable liquidity environment. However, sustainability depends on factors like second-quarter earnings confirming a profit recovery and navigating ongoing global uncertainties.
Which sectors are analysts watching most closely now?
Key sectors include large financials (for valuation repair), scarce resources (for safety margins), and domestic rise segments like tech (AI, biopharma), green energy, and advanced manufacturing. A barbell strategy combining dividends and growth is also popular.
How significant was the trading volume during the rally?
Trading volume reached over 1.6 trillion yuan, increasing by nearly 190 billion yuan from the previous session. This significant放量 (volume expansion) indicates strong participation and confirms the momentum behind the price surge.
What are the main risks to the market outlook?
Primary risks include misalignment between market expectations and fundamental economic data, potential volatility from global trade tensions, and the pace of domestic profit recovery. The mid-year earnings season will be a critical test.
Why is the Hong Kong market relevant to A-shares currently?
Developments in Hong Kong, such as new licenses for virtual asset trading and its role as an offshore financial center, are creating new business avenues for Chinese brokers and financial firms, impacting their valuations and contributing to positive sentiment in related A-share sectors. 👉 Get advanced methods for tracking market developments