Smart Money Surges: A-Shares in 2025

Recent data has revealed a significant shift in the savings behavior of the Chinese populaceIn October, household deposits saw a staggering decline, plummeting by 570 billion yuanThis raises an intriguing question: where is all this money flowing to?

As it turns out, the statistics indicate that non-bank financial deposits soared by 573.2 billion yuan compared to the previous year, encompassing funds from various financial institutions, including brokerages, mutual funds, trusts, and insurance companiesThis pattern could potentially suggest that money is being redirected from traditional savings to investment avenues, particularly in response to a recovering stock market that has attracted liquidity away from conventional savings accounts.

The changing financial landscape has been characterized by a "teeter-totter" effect, where savings are shifting from one pot to another, reflecting the evolving sentiment of investors who are becoming more attentive to market trends

As the end of the year approaches, there is a palpable sense among analysts that a turning point in both global economic trends and the trajectory of the A-share market may be on the horizon.

After months of stagnation, the A-share market has experienced a resurgence, often described as a mini bull market, capturing the attention of investors and financial analysts alikeHowever, this rapid escalation has led to speculation regarding the sustainability of this trend: are we nearing the end of this rally, or is it merely the beginning of a more significant bull phase?

From September onward, a suite of domestic policies was introduced, coinciding with the U.Sadministration's election outcome in NovemberWith numerous uncertainties now clarified, short-term speculative trades have begun to manifest in market indexes, while medium and long-term trends are steadily becoming more predictable

• U.S. Inflation Decline Set to Slow
• Developing Multi-Tiered Capital Markets
• Dollar Wealth Management Assets Double Amidst Interest Rate Uncertainty
• RMB Stays Steady Against a Strong Dollar
• India's Q3 GDP Growth Hits Low, Economy Faces Headwinds

This optimistic outlook has been echoed by several domestic and international institutions, which project a comparatively favorable environment for the A-share market in 2025.

Analysts suggest that the market may have already passed the bottom, and investor risk appetite is expected to improve overall in 2025. Moreover, there is an anticipation of increasing structural opportunities for investorsAccording to a report from China International Capital Corporation (CICC), the influx of new funds could be a pivotal driver of the A-share market's upward momentum, as both domestic and global asset allocation demands shift toward the undervalued A-share market.

Morgan Stanley has also shared its optimistic forecast for the A-share market, highlighting the recent domestic policies aimed at economic stabilization amidst the backdrop of changing U.S

tariff policiesThese developments have had a noticeable impact on the market in recent months.

Wang Ying, Morgan Stanley's Chief Equity Strategist for China, noted that since September 24, the latest policy adjustments have significantly heightened market activity and led to a reassessment of valuations in both the A-share and offshore markets.

Goldman Sachs has provided its insights for 2025, reaffirming its commitment to high allocations in both the A-share and Hong Kong marketsIt currently favors A-shares over Hong Kong stocks in the short term, citing their heightened sensitivity to policy easing and the influx of retail investor capital.

In addition to domestic optimism, foreign investors are increasingly eyeing the A-share market

While this trend is also reflected in analyses regarding the ongoing U.S.-China trade tensions and tariffs, much of these concerns have been factored into current market valuations.

As institutions engage in discussions about the outlook for 2025, a consensus is emerging that next year could indeed witness a historic turning point for the A-share marketConsequently, an influx of capital seems to be swiftly entering the market.

So, what investment tools are suitable for ordinary investors looking to dive into this potentially promising market?

Given the decline in bank interest rates, coupled with the volatility of the U.Sdollar and yuan, as well as fluctuations in gold prices, it is crucial for retail investors to establish a long-term, stable investment strategy

The signal for market entry has already been established; in September, government entities took the lead, clarifying the intention to steer long-term capital into the market.

In assessing how best to capitalize on A-shares from a macro asset allocation standpoint, index funds emerge as a cost-effective option for investors seeking efficient exposure to the A-share market.

Looking to international precedent, American millennials have notably allocated a significant portion of their wealth to index funds; a recent study from FTSE Russell reveals that 44% of their investment portfolio is held in index funds, a figure that surpasses that of older generations.

This interest in passive investing, which has been on the rise in the U.Sfor many years, has led to passive index funds accumulating assets at a rate that has outpaced actively managed funds.

A similar trend is emerging within the A-share market, as an increasing number of domestic institutions and individual investors realize the appealing aspects of passive investment strategies

By the end of Q3 this year, passive index funds surpassed active funds in total market value for the first time, marking a significant milestone in A-share investing.

As evidence of the growing popularity of index funds, a remarkable phenomenon has unfolded in the A-share market recently, characterized by extraordinary demand for a newly launched index fund.

The newly introduced CSI 500 Index fund has experienced an impressive influx of more than 200 billion yuan within just two months of its launch, setting a record for fund-raising speed in the history of A-shares, and has quickly become the second-largest broad-based ETF in China, trailing only the CSI 300.

This funding emphasis on the A500 Index has been likened to a Chinese equivalent of the S&P 500, marking the first major broad-based index introduced since the "Nine New National Policies" came into effect.

What sets the A500 index apart from its predecessors is its innovative structure, which diversifies its holdings across both large-cap blue-chip stocks and smaller companies, employing an industry-balanced approach.

Furthermore, it incorporates contemporary methodologies, such as ESG evaluations and cross-market connections, making it more aligned with the preferences of international long-term investors.

For individuals contemplating entry into the A-share market but uncertain about specific investment choices, index funds like the A500 ETF provide a straightforward and transparent means of participation.

Nonetheless, investors are encouraged to align their choices with their risk tolerance and return expectations before making more nuanced selections:

First, compare fees: Index funds are appealing due to their lower management fees, making it advisable to prioritize options with minimal costs.

Second, consider the dividend policies: Investors prioritizing liquidity may prefer A500 products that offer dividends.

Third, invest in reputable firms: While index funds operate through passive strategies, selecting funds managed by established companies can help minimize tracking errors and transaction costs.

One of the earliest fund companies to enter the index fund space, Harvest Fund Management offers a comprehensive range of ETF products, backed by years of expertise in index investing across various themes.

For example, the A500 Index ETF (159351) and its associated connection funds exemplify user-friendly and transparent investment options, allowing everyday investors to engage in the A-share market comfortably.

Moreover, Harvest Fund has a proven legacy in index management: its HuShen 300 ETF and the CSI 500 ETF consistently lead in terms of assets under management, contributing significantly to enhancing the ETF ecosystem.

Enhancing client experiences, the Harvest HuShen 300 ETF has emerged as the fourth-highest fund in terms of dividend payouts this year, and the CSI 500 ETF recently implemented a share split followed by a dividend disbursement.

This split occurred at a ratio of 1:2.5, with a subsequent distribution of 1.2920 yuan per 10 shares, yielding an impressive annualized dividend rate of 4.9%, marking it as one of the leading ETFs with over 10 billion yuan in dividends this year.

Harvest Fund is also one of the few firms to maintain a comprehensive presence across various A-series indices (A50, A100, and A500), with the A500 index ETF (159351) surpassing 10 billion yuan in assets since its launch, showcasing sustained trading activity.

In summary, the landscape of asset allocation among Chinese residents is witnessing a transformative evolution