ISLAMABAD, Oct 24 (ABC): China’s equity market is attracting stronger participation from long-term investors as regulatory reforms encourage institutional investment and improve shareholder returns. The growing interest has also contributed to a sharp increase in stock trading activity during 2026.
According to the China Securities Regulatory Commission (CSRC), social security funds, annuity funds, insurance institutions and other medium- and long-term investors have made net purchases of more than 600 billion yuan in A-shares since the beginning of 2026.
The market value of their holdings of tradable A-shares has also increased by 12.5% compared with the end of 2025.
Meanwhile, Shanghai Stock Exchange figures show that stock turnover reached approximately 208.37 trillion yuan during January-September 2026. This compares with 122.22 trillion yuan during the corresponding period last year, representing an increase of about 70%.
The substantial rise in trading activity indicates growing investor interest and broader market participation.
Chinese regulators have introduced several measures to strengthen the equity market. These include encouraging long-term investment, improving shareholder returns and expanding financing opportunities for innovative companies.
However, market volatility remains evident. The Shanghai Composite Index closed September at 3,842.19 points, below its August closing level of 3,986.30 points.
Haris Javad, Equity Investment Manager at Syed Faraz Equities, told Wealth Pakistan that the increasing participation of long-term investors was an important development for China’s equity market.
He said the return of patient capital was particularly significant as Chinese authorities continued to improve market structures and encourage shareholder returns.
“When pension, insurance and other long-term investors increase their exposure, it sends a stronger signal than a short-lived rally driven by speculative flows. It suggests that investors are becoming more comfortable with valuations, liquidity and the broader policy environment surrounding the market,” he said.
Javad explained that institutional investors generally follow longer investment strategies. They also place greater emphasis on financial stability, corporate performance and sustainable returns.
Consequently, a market recovery supported by institutional investment could provide a stronger foundation for investor confidence than one driven mainly by short-term trading.
Although higher turnover reflects growing market activity, Javad cautioned that trading volumes alone do not necessarily indicate stronger underlying fundamentals.
“For a sustainable equity recovery, you want to see liquidity accompanied by stronger institutional ownership, improving corporate fundamentals and greater confidence in market rules. Rising volumes alone are not enough, but when long-term investors are also increasing their positions, the quality of the recovery improves,” he said.
Regulatory reforms encourage long-term investment
China’s growing institutional investment reflects broader efforts to strengthen domestic capital markets.
In September, the CSRC outlined plans to improve mechanisms supporting long-term investment, expand equity-oriented public funds and strengthen institutional participation.
The regulator has also emphasised the importance of creating an investment environment that encourages pension funds, insurance institutions and other long-term investors to increase their equity exposure.
These measures aim to develop a more stable investor base while helping capital markets meet businesses’ long-term financing needs.
According to the CSRC, public funds generated approximately 1.74 trillion yuan in profits for investors during the first half of 2026.
The figure highlights the scale of investment returns reported across China’s public fund sector during the period.
Regulatory reforms have also encouraged listed companies to improve shareholder returns through dividends and share repurchases.
The CSRC reported that dividends and share buybacks by A-share listed companies over the past two years exceeded three times the value of equity financing raised during the same period.
This development reflects growing attention to shareholder distributions and the role of listed companies in delivering investment returns.
Javad said stronger dividend payments and share buybacks could improve investor confidence by encouraging greater attention to corporate earnings and capital management.
“When companies return more capital to shareholders through dividends and buybacks, it can make the market more attractive to long-term investors. It also puts greater emphasis on earnings quality and capital discipline, which are important for building durable confidence,” he said.
He added that consistent shareholder returns could attract institutional investors seeking sustainable investment opportunities rather than relying mainly on short-term price increases.
China strengthens market liquidity and financing support
Alongside regulatory reforms, Chinese monetary authorities have introduced financial facilities to support stock-market liquidity.
The People’s Bank of China has combined its securities, funds and insurance swap facility with its share buyback and shareholding-increase relending programme under an overall quota of 800 billion yuan.
These arrangements aim to improve market liquidity and facilitate financing for eligible financial institutions and listed companies.
They also provide additional flexibility during periods of financial uncertainty.
However, liquidity-support facilities do not automatically guarantee higher share prices or sustained market gains. Corporate profitability, economic conditions and investor expectations remain important factors influencing market performance.
China is also working to make its capital markets more accessible to innovative and high-quality enterprises.
Under its financial-sector development plans, regulators intend to introduce more inclusive rules for listings, refinancing and mergers.
The proposed reforms could help innovative businesses raise capital for technological development, industrial upgrading and expansion into new economic activities.
By improving access to equity financing, these measures could strengthen the role of capital markets in supporting investment and long-term economic growth.
Stronger corporate earnings key to sustained market growth
China’s equity-market developments are also important for international investors because of the country’s economic scale and the global presence of its listed companies.
Chinese businesses operate across major sectors, including manufacturing, technology and financial services.
Stronger institutional participation, improved shareholder returns and more predictable regulations could contribute to a more stable investment environment.
Nevertheless, future market performance will continue to depend on economic conditions and the financial strength of individual companies.
Javad said the sustainability of China’s equity-market recovery would depend on whether listed companies could translate policy support and stronger investor participation into improved financial performance.
He described institutional buying and supportive regulatory measures as encouraging developments. However, he stressed that lasting investor confidence required stronger earnings and healthier corporate balance sheets.
“Policy support can stabilise sentiment, but a lasting equity-market recovery needs improving earnings, stronger balance sheets and confidence that companies can continue creating value. If those fundamentals strengthen alongside institutional participation, the recovery can become much more durable,” he said.
