Is China’s Stock Market About to Party Like It’s 2014? CITIC Securities Thinks So

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Market Performance Leading Up to Bull Runs

Index	Period	Return (%)
ChiNext Index	2013 – Late 2014	110.8
CSI 2000 Index	2013 – Late 2014	97.8
Hang Seng Index	YTD Current	19.2
Hang Seng Tech Index	YTD Current	16.7
Hang Seng High Dividend Yield Index	YTD Current	18.1

Investment Fund Inflows (Year-over-Year Growth)

Fund Type	Period	Growth (%)
Private Securities Investment Funds	Jan-May Current Year	151
Equity Public Funds	H1 Current Year	124

China’s stock market is showing some eerie similarities to late 2014, a period that preceded a massive bull run.

According to a new report from the strategy team at CITIC Securities (Zhongxin Zhengquan 中信证券), the current market environment and investor vibe feel a lot like they did back then.

The key ingredients are there: investors are pocketing some wins, new money is starting to trickle in, and the government is signaling a major policy push.

But there’s one thing missing: a key catalyst to light the fuse.

Let’s break down what CITIC is seeing, the one big hurdle holding things back, and where the smart money might be flowing next.

The 2014 Flashback: A Familiar Feeling in the Air

So, what’s behind this feeling of déjà vu? It boils down to a few core factors that are lining up just like they did a decade ago.

1. Investors Are Getting Their Mojo Back

Bull markets don’t just appear out of thin air.

They often start after a wave of investors has already seen some solid gains, boosting their confidence to take on more risk.

• Back in 2014: Before the big rally, investors had made a killing in small-cap and GEM (Growth Enterprise Market) stocks. The ChiNext Index (Chuàngyèbǎn Zhǐ 创业板指) and CSI 2000 Index (Guózhèng 2000 国证2000) soared 110.8% and 97.8%, respectively, from 2013 to late 2014.
• Fast forward to today: A similar pattern is emerging, but this time the gains are coming from Hong Kong and A-shares. Year-to-date, we’ve seen impressive returns from the Hang Seng Index (Héngshēng Zhǐshù 恒生指数) up 19.2%, the Hang Seng Tech Index (Héngshēng Kējì Zhǐshù 恒生科技指数) up 16.7%, and the Hang Seng High Dividend Yield Index (Héngshēng Gāo Gǔxī Zhǐshù 恒生高股息指数) up 18.1%.

The money is also starting to flow back into investment products, another classic sign of a warming market.

Private securities investment funds saw registrations hit ¥154.1 billion RMB ($21.26 billion USD) in the first five months of this year—a staggering 151% increase year-over-year.

Equity public funds weren’t far behind, with issuance hitting ¥235 billion RMB ($32.43 billion USD) in the first half, up 124% year-over-year.

It’s not a floodgate yet, but it’s a continuous, mild recovery.

2. The Policy Shift: “Anti-Involution” and Boosting Demand

The government’s focus is crystal clear: tackle “anti-involution” (反内卷)—a term for addressing excessive, unhealthy internal competition—and fire up domestic demand.

Policy documents from top government bodies like the Zhongban (中办) and Guoban (国办) are now talking about expanding domestic demand through social security, a big shift.

Discussions around creating a unified domestic market (Tǒngyī Dà Shìchǎng 统一大市场) are also getting more serious.

CITIC’s take? Once these issues are on the table, it’s just a matter of time before concrete solutions are rolled out.

They believe many of these long-term strategic adjustments will be formally laid out in the upcoming “15th Five-Year Plan” (Shíwǔwǔ Guīhuà 十五五规划).

Consensus Net Profit Estimate Revisions

Category/Index	Period	Revision (%)
Non-financial A-shares	2025 Estimates (Current)	-6.0
CSI 2000 Index	2025 Estimates (Current)	-7.7
Non-financials	2015 Estimates (2014)	-2.5

The Big Hurdle: Why It’s Not *Exactly* 2014… Yet

While the parallels are compelling, there’s one major difference between now and then.

The single biggest gap is confidence in company earnings.

Right now, the market is way more cautious. Analysts are busy revising their profit estimates downwards.

• The consensus net profit estimates for 2025 for non-financial A-shares have been slashed by 6.0%.
• For the CSI 2000 index, that revision is a hefty 7.7% cut.

Back in 2014, the downgrades were much milder (Just 2.5% for non-financials in 2015).

But here’s the twist: Even with these gloomy earnings forecasts, the market is holding up surprisingly well.

This suggests that while conservative money is still parked in “safe” dividend sectors like banks, new money is actively hunting for opportunities elsewhere.

The market’s resilience is better than expected.

• A surprise from the US: An unexpected interest rate cut by the Federal Reserve (currently ~5% chance in July).
• A surprise from China: A surprisingly strong policy stimulus package announced at this month’s Politburo meeting.
• A tech breakthrough: Major new developments in AI models, edge devices, or domestic AI hardware.

The Missing Spark: What Catalyst Could Light the Fuse?

So, the stage is set. The market is just waiting for a powerful catalyst to ignite it.

What could that be?

CITIC points to a few possibilities that are currently considered low-probability, high-impact events:

• A surprise from the US: An unexpected interest rate cut by the Federal Reserve. The market is currently pricing in only a ~5% chance of this in July.
• A surprise from China: A surprisingly strong policy stimulus package announced at this month’s Politburo meeting.
• A tech breakthrough: Major new developments in AI models, edge devices, or domestic AI hardware could provide the spark. Expectations here are low, meaning there’s lots of room for an upside surprise.

• Megatrends (AI & Innovative Medicines):
  • AI: Exploding demand for AI inference computing, domestic AI application breakthroughs (e.g., Doubao).
  • Innovative Medicines: Triple confluence of policy support, fresh capital, and industrial momentum.
• The Sweet Spot (Computing, Metals, & Gaming):
  • North American Computing Power Chain: Rising demand (optical modules, PCBs), reasonable valuations.
  • Non-ferrous Metals: Precious metals as safety, industrial metals rallying, strategic rare earths.
  • Gaming: Institutional play with reduced R&D, strong overseas revenue, insulated from trade wars.
• Thematic & Positional Plays (Military & New Energy):
  • Military Industry: Short-term catalyst (Sept 3rd parade), long-term “15th Five-Year Plan” focus.
  • Anti-Involution & New Energy: Potential benefit for beaten-down sectors (steel, PV, cement), attractive valuations in certain new energy sub-sectors (lithium batteries, PV inverters).

Where to Invest? CITIC’s Top Themes for the Mid-Year

Given this backdrop, CITIC has mapped out three key investment themes for the mid-year reporting season.

Theme 1: Ride the Megatrends — AI & Innovative Medicines

• AI: The demand for AI inference computing power is exploding. The next big thing to watch is a real breakthrough in domestic AI applications. Keep an eye on moves like Doubao’s (Dòubāo 豆包) new “in-depth research” feature. Can China’s “free basic service + paid premium features” model finally take off?
• Innovative Medicines: This sector is on fire, thanks to a “triple confluence” of policy support, fresh capital, and industrial momentum. Big players are hitting new highs, signaling that serious institutional money is moving in.

Theme 2: The Sweet Spot (Performance + Valuation) — Computing, Metals, & Gaming

These sectors offer a rare combination of clear performance drivers and reasonable valuations.

• North American Computing Power Chain: Demand for optical modules, PCBs, and other components tied to AI keeps getting revised upwards, yet valuations remain in a reasonable range.
• Non-ferrous Metals: Precious metals offer a safety net, industrial metals are rallying on low inventory, and the strategic value of rare earths is getting a major rethink.
• Gaming: A perfect institutional play. Big companies have cut back on R&D costs, overseas revenue is strong, and a bonus—it’s not caught up in trade wars.

Theme 3: Thematic & Positional Plays — Military & New Energy

These are for investors with a bigger appetite for risk and a focus on timing.

• Military Industry: A planned military parade on September 3rd is acting as a short-term catalyst. The long-term story is about the “15th Five-Year Plan” and global defense spending, but that comes with higher volatility.
• Anti-Involution & New Energy: As a hot theme, “anti-involution” could benefit sectors that have been beaten down and seen investors flee, like steel, photovoltaics (PV), and cement. Some new energy sub-sectors like lithium batteries and PV inverters are also trading at attractive valuations.

• An escalation of Sino-US friction in tech, trade, or finance.
• Domestic policy or the economic recovery falling short of expectations.
• An unexpected tightening of macroeconomic liquidity, both at home and abroad.
• Further escalation of geopolitical conflicts in Ukraine and the Middle East.
• China’s real estate inventory being digested slower than expected.
• An unexpected policy shift from Donald Trump.

The Fine Print: Key Risks to Watch

No investment thesis is complete without looking at the downside. Here are the potential roadblocks:

• An escalation of Sino-US friction in tech, trade, or finance.
• Domestic policy or the economic recovery falling short of expectations.
• An unexpected tightening of macroeconomic liquidity, both at home and abroad.
• Further escalation of geopolitical conflicts in Ukraine and the Middle East.
• China’s real estate inventory being digested slower than expected.
• An unexpected policy shift from Donald Trump.

The bottom line? The current market has echoes of a past rally, but it’s not a carbon copy. Key differences in fundamentals and the need for a strong catalyst make it a unique and complex environment. Still, while risks remain, CITIC’s analysis points to a fascinating period ahead for investors watching China’s market.

References

• 中信证券：目前市场环境和氛围有一些2014年底的影子 只缺一个点火催化 – Eastmoney.com
• 财联社 – Cailianpress
• CITIC Securities – Official Website

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