How to view the current allocation cost-effectiveness of A-shares? Leading public funds have spoken out.
The recent A-share market continues to see fluctuations, but capital is making contrarian layouts.
Since the first batch of active ETFs were launched intensively last Friday, 11 products have been sold out in one day and hit the RMB 2 billion fundraising cap so far. Many leading public fund houses including E Fund, Fullgoal, China Asset Management, China Universal, Huaan, etc. have also announced that they will purchase their own active ETFs. In addition, amid market fluctuations, many broad-based ETFs have continued to see contrarian capital inflows, and long-term funds are making layouts in the low-level equity market through index tools.
At the current point in time, many leading public fund houses have collectively voiced their optimism about the investment value of the capital market. The confidence of public fund institutions mainly comes from the dual support of fundamentals and valuation: on the one hand, the three quarterly reports of listed companies continue to send signals of improving profitability, and the profit growth rate of listed companies this year is expected to hit a new high in five years; on the other hand, the overall valuation of the A-share market has fallen to a historically low range, highlighting the equity-bond cost-effectiveness and providing a safety cushion for medium and long-term allocation.
Profit Growth of Listed Companies Expected to Hit a New High in Five Years
As the three quarterly reports of listed companies are gradually disclosed, signals of improvement on the profitability side continue to be released. Public fund institutions judge that the profit repair trend of A-shares is expected to continue.
Based on the three quarterly reports, Li Zhan from China Merchants Fund analyzed that the performance of listed companies in the third quarter presents a pattern of "wide profitability coverage and prominent main lines". As of October 25, among the 1,035 companies that have disclosed their three quarterly reports, 836 are profitable, with a profitability coverage rate of about 80.8%, and 177 companies have doubled their net profit year on year. The highlights are concentrated in three main lines: first, storage chips, as the single direction contributing the largest profit increment, the storage chain accounts for nearly 90% of the total profit increment; second, AI computing power hardware, whose prosperity spreads from chips to the whole chain of PCB, optical modules and servers, with the net profit growth rate generally reaching 70%-170%; third, the dilemma reversal of cyclical products, the net profit growth rate of lithium battery, petrochemical and non-ferrous sectors has reached several times to dozens of times, and the rebound of product prices drives the concentrated release of profit elasticity.
From the full-year perspective, some public fund institutions predict that the profit growth rate of listed companies this year is expected to hit a new high in five years.
Chen Jie, Assistant General Manager of Fullgoal Fund and General Manager of Equity Research Department, said that China's GDP growth rate in the first three quarters of 2026 is 4.6%, while the overall interim report profit growth rate of A-share listed companies is as high as 15.9%. We expect the overall full-year profit growth rate of A-share listed companies in 2026 will also maintain this level, which is the highest growth rate since 2021.
Industrial Structure Upgrading Drives Improvement of Profit Quality
While profits are rising, the improvement of profit quality driven by industrial structure optimization deserves more attention.
When analyzing the reasons for the jump in the profit growth rate of A-share listed companies, Chen Jie pointed out that the industrial structure of the A-share market has been greatly upgraded compared with ten years ago, and the profit composition of listed companies has changed from being dominated by the traditional "two highs and one resource" (high pollution, high energy consumption, resource-based) industries to being dominated by "new quality productive forces" industries.
Chen Jie further analyzed that ten years ago, the total profit of the "two highs and one resource" industries accounted for 76% of the total A-share market excluding the financial sector, while the latest 2026 interim report data shows that the total profit of "new quality productive forces" industries represented by communications, electronics, new energy, etc. has accounted for 39% of the total A-share market excluding financial companies. In addition, many industries among listed companies have benefited from this round of AI industry wave, achieving leapfrog growth in profits. Taking the electronics industry as an example, the overall profit growth rate of the industry in the 2026 interim report is as high as 101%, a significant acceleration compared with 32% in 2025; the profit growth rate of leading optical module companies in the 2026 interim report is as high as 167%, reflecting the strong demand in the AI hardware market.
Chen Jie also emphasized that while the profit growth rate jumps, the profit quality of A-share listed companies has also stabilized and risen. The 2026 interim report data shows that the four-quarter rolling ROE of all A-share listed companies is 8%, which has rebounded upward for the first time after four consecutive years of decline. After further decomposing ROE based on the classic "DuPont Analysis", Chen Jie and his team found that the sales profit margin, asset turnover rate and leverage ratio of A-share listed companies all showed signs of bottoming out and rebounding. The rebound of ROE means that the sustainability of this round of profit improvement is worth looking forward to, and shareholder returns are also expected to increase significantly.
Jia Jian, General Manager of Equity Investment Management Department and General Manager of Research Department of E Fund, also emphasized that listed companies are the cornerstone of the capital market, and the improvement of profitability is an important source of long-term investment value. Looking to the future, Jia Jian pointed out that with the continuous release of AI computing power demand and the accelerated transformation of scientific and technological innovation achievements, the performance of listed companies is expected to continue to grow rapidly. The development of new quality productive forces is not only reflected in industrial direction and technological breakthroughs, but also gradually reflected in real profit growth, injecting impetus into the long-term development of the capital market.
Market Valuation Has Strong Safety Margin
Against the background of continuous improvement of profit fundamentals, coupled with the decline of valuation level, the allocation cost-effectiveness of A-share equity assets is further highlighted.
Zhang Danhua, Deputy General Manager of Harvest Fund and CIO of Stock Investment, emphasized that in terms of market valuation, the current overall A-share valuation PE multiple has fallen back from a position close to twice the standard deviation, and is now close to once the standard deviation, entering a historically low range; while the equity risk premium (ERP) has rebounded to a historically medium-high level, which also means that the overall equity-bond cost-effectiveness is once again in favor of equity assets.
Jia Jian also believes that the current market valuation is at a low level, and the medium and long-term allocation value of equity assets is further emerging. Specifically, after the recent adjustment, as of October 23, the price-earnings ratio (TTM) of the CSI 300 Index is less than 13 times, at a historically low level, significantly lower than the current valuation levels of similar international indices such as the S&P 500 and the Nikkei 225. The price-earnings ratio of the ChiNext Index, which represents emerging industries, has fallen to a historical percentile of about 16% since 2015, and its medium and long-term allocation value has gradually emerged.
From the perspective of large-class asset allocation, Jia Jian emphasized that the current dividend yield of CSI 300 is about 2.8%, significantly higher than the 10-year Treasury bond yield, reflecting the relative attractiveness of equity assets. The combination of low valuation level, dividend return and continuously improving profitability provides an important value reference for investors focusing on the long term, and also provides support for the medium and long-term performance of the market.
Specifically for the segmented sectors, the valuation of large-cap blue-chip sectors already has a strong safety margin. Li Zhan pointed out that after the correction in the second half of the year, the valuation of large-cap blue chips has fallen back to near the historical central level, and the safety margin has increased. As of October 23, the CSI 300 price-earnings ratio (TTM) is 12.87 times, at the 52nd percentile of the past ten years, with a dividend yield of 2.81%; the SSE 50 price-earnings ratio (TTM) is 10.77 times, with a dividend yield of 3.26%. In addition, medium and long-term funds such as insurance are continuously increasing their allocation to low-valuation high-dividend assets, and the allocation value of blue chips with "stable profitability, low volatility and rich dividends" is emerging.
This article is from the WeChat Official Account "ChiNext Observation", author: Li Di, published with authorization from 36Kr.