The A-share market, despite facing temporary downward pressure due to last week's sharp sell-offs in the global tech sector, still holds promise for a gradual bull run, experts said, citing broad-based earnings improvements and robust growth of China's artificial intelligence industry.

Due to pullbacks in sectors including energy metals, batteries and communications equipment, the benchmark Shanghai Composite Index shed 2.26 percent to close at 4027.26 points on Friday. The Shenzhen Component Index slid 3.44 percent and the technology-focused ChiNext in Shenzhen lost 4.07 percent.

This was part of an overall market slide in the Asia-Pacific region on Friday. The Hang Seng Index in Hong Kong shed 1.76 percent while the Hang Seng Tech Index fell 3.41 percent. Japan's Nikkei 225 dropped 4.15 percent and the South Korean stock market, which saw its Kospi Index close 5.81 percent lower, halted trading for 20 minutes during the morning session as the index plunged over 8 percent for the fifth time this year.

Despite short-term market volatility, analysts said that China's macroeconomic fundamentals remain supportive for equities. They noted that major international financial institutions including Goldman Sachs and Morgan Stanley expect the Chinese economy to remain resilient this year, supported by policy measures, improving exports, stronger corporate earnings and the rapid development of AI, which is building a solid foundation for the stock market over the medium to long term.

The latest bout of market volatility was partly fueled by global concerns over the tech sector, following Apple's announcement on Thursday of a price hike amid surging memory chip costs, and reports that OpenAI is postponing its IPO until next year. In the trading week ending Friday, the United States' stock market witnessed its first net outflow in 13 weeks, with the tech sector logging a record $9.3 billion in weekly net outflow.

Yang Delong, chief economist at First Seafront Fund in Shenzhen, Guangdong province, said the pullback was mainly a correction for sectors that had drawn excessive capital and risen too fast, and the scale of the correction should be relatively small.

Wang Yongjian, an analyst at Zhongtai Securities, said that systemic risks are low in the A-share market. He added that structural opportunities exist in upstream resources and selected themes.

Xia Fanjie, a strategist at China Securities, said that he remained optimistic about a slow A-share bull run, fueled by AI and computing. The supportive policies introduced at the Lujiazui Forum held in mid-June in Shanghai will translate into strong performance in the technology-focused STAR Market in Shanghai and ChiNext in Shenzhen, he said.

Yang Weiyong, an associate professor of economics at the University of International Business and Economics, stressed that AI is no castle in the air. He said that it is underpinned by solid technological and industrial foundations, and unlike the dot-com bubble back in 2000, when viable profit models were largely absent, AI today has been deeply integrated into numerous industries and delivered tangible value.

According to Meng Lei, a China equity strategist at UBS Securities, recovery in A-share profitability has been accelerating, which can be seen from the first quarter fiscal results and the improving industrial profits. The average profitability growth rate is likely to reach 11 percent in 2026, up from 3.9 percent last year. Overseas investors are likely to further return to the Chinese stock market, Meng said.

source: China Daily

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