The next boost for Chinese stocks will come from earnings growth after this year’s rally was driven by investors’ willingness to accept higher valuations, according to Bank of America (BofA) Global Research.
“In 2025, we saw continued global market rally, and a lot of it was driven by multiples expansion, meaning the stocks are getting more expensive rather than earnings improvement,” said Winnie Wu, head of Asia-Pacific equity strategy and co-head of China equity strategist at BofA Global Research, on Tuesday.
China had ridden the same wave, she added, helped by abundant liquidity and a sharp turnaround in perceptions about the country’s long-term prospects.
“The next level up for China’s market rally needs to be driven by earnings, rather than betting on too much of a multiple expansion at this level,” she said, adding that investors were happy to buy the dips but reluctant to chase highs.
After this year’s rally, though, valuations would limit how much further price-to-earnings multiples could stretch, Wu said. Following a correction in November, the forward valuation for the MSCI China Index has fallen to about 12.7 times from nearly 14 times in early October.
BofA Global Research, a part of Bank of America, covers some 3,500 stocks globally. On Tuesday, it raised China’s gross domestic product growth forecast to 4.7 per cent in 2026 and 4.5 per cent in 2027.
