Chinese Shares Surge to Highest Level in Four Years, Marking Robust Beginning to 2026

Chinese Stock Markets Reach Multi-Year Peaks Amid AI Optimism

Chinese equities surged to their highest levels in years, driven by growing enthusiasm for advancements in artificial intelligence and encouraging signs of economic improvement.

The CSI 300 Index climbed 1.6%, closing at a four-year high, while the Shanghai Composite Index gained 1.5%, reaching its strongest point since July 2015. Shares in the technology and materials sectors led the rally.

Investor confidence was bolstered by positive manufacturing data, President Xi Jinping’s favorable outlook on the economy, and continued momentum in AI-related stocks. The year 2026 has begun with strong optimism, as many expect the positive trend that set Chinese stocks apart globally last year to continue. This outlook is supported by government initiatives targeting key industries and efforts to revitalize the struggling property sector.

Billy Leung, an investment strategist at Global X Management, noted, “Market sentiment has turned more positive as several factors have aligned. Policy direction became clearer earlier than usual, investor positioning was light at the end of last year, and there are early indications that parts of the economy, especially manufacturing, are stabilizing.”

Trading activity in mainland markets soared to approximately 2.8 trillion yuan (about $400.6 billion), the highest since mid-September. Margin lending for stock purchases also remained near record levels.

These gains occurred alongside a strong performance in global markets, with various indices reaching new highs despite geopolitical tensions in Latin America. Technology stocks, particularly those connected to the AI supply chain, continued to attract attention.

However, there are signs that the rally may be overheating. The Shanghai Composite’s 14-day relative strength index, a measure of market momentum, rose above 75 on Tuesday, signaling overbought conditions for the first time since early September. The CSI 300 is nearing this threshold as well, a level last surpassed in October.

Despite these concerns, investors remain confident about further gains. A robust pipeline of domestic AI-related company listings is expected to sustain positive sentiment, following two major IPOs last month. Notably, ChangXin Memory Technologies Inc. and Yangtze Memory Technologies Co. are each seeking valuations between 200 billion and 300 billion yuan.

Enthusiasm for Chinese AI continues to grow in 2026, supported by DeepSeek’s research on more efficient development methods and the rising global popularity of Kuaishou Technology’s AI-powered video app.

Hao Hong, Chief Investment Officer at Lotus Asset Management, commented on Bloomberg TV, “DeepSeek is achieving significant breakthroughs, as are many other Chinese AI firms.” He added that increasing market liquidity is creating favorable conditions for risk-taking.

Market Reactions and Currency Movements

As stocks advanced, investors reduced their holdings in Chinese government bonds, causing the yield on the 10-year note to rise by 2 basis points to 1.88%. Meanwhile, the offshore yuan appreciated by 0.1% to around 6.98 per US dollar, approaching its strongest level since May 2023.

With reporting assistance from Winnie Hsu, Julia Zhong, and Wenjin Lv.

©2026 Bloomberg L.P.