2026 China Stock Market Undervalued High-Dividend Blue-Chip Investment Strategy Analysis

Based on the latest data, the Shanghai Composite Index is currently trading around 3870 points, up 13.74% year-to-date[0]. From a technical analysis perspective:

• Key Support Level
  : Around 3500 points (policy bottom and valuation bottom)
• Key Resistance Level
  : 4000-point integer mark (psychological pressure level)
• Fluctuation Range
  : Year-to-date low of 3040 points, high of 4034 points, fluctuation amplitude of 30.13%[0]

Based on the current market environment, the probability of the Shanghai Composite Index fluctuating in the range of 3500-4000 points in 2026 is relatively high, mainly due to the following reasons:

1. Obvious policy bottoming effect, strong support below 3500 points
2. Impact of economic recovery pace; breaking through 4000 points requires better-than-expected positive factors
3. Uncertainty in international markets limits upside potential

China’s manufacturing industry continues to advance transformation and upgrading, making breakthroughs in fields such as quantum communication and artificial intelligence patents[1]. JPMorgan recently upgraded China’s stock rating to “Overweight”, believing that the prospect of a sharp rise next year now outweighs the risk of significant losses[2].

:

• Current share price:9.51 yuan, P/E ratio:11.06x, P/B ratio:1.12x[0]
• Relative to historical valuations, it is at a low level with a margin of safety
• Market capitalization:1.74 trillion yuan, obvious weight effect

:

• ROE:10.45%, Net profit margin:5.65%[0]
• Current ratio:1.04, stable short-term solvency
• Share price increase of125.36% in the past3 years, long-term trend is positive

:

• Core target under the energy security strategy
• Direct beneficiary in the oil price uptrend cycle
• High dividend feature provides defensive support

:

• Current share price:102.31 yuan, P/E ratio:15.60x, P/B ratio:1.20x[0]
• Leading communication service provider, relatively reasonable valuation
• Market capitalization:1.68 trillion yuan, solid industry position

:

• ROE:10.42%, Net profit margin:13.72%[0]
• Operating profit margin:17.35%, high profit quality
• Entering the harvest period after completion of 5G construction

:

• Core of digital economy infrastructure
• Abundant cash flow, stable dividends
• Cloud computing and IDC businesses have great growth potential

:

• Current share price:13.53 HKD, P/E ratio: only3.90x, P/B ratio:1.01x[0]
• Absolutely undervalued, with large room for valuation repair
• Market capitalization:211 billion HKD, obvious valuation advantage in Hong Kong stocks

:

• ROE up to16.14%, Net profit margin:16.78%[0]
• Operating profit margin:27.91%, industry-leading level
• Current ratio:1.50, healthy financial structure

:

• Global shipping industry prosperity is improving
• Elastic target in the freight rate uptrend cycle
• Expectation of narrowing H-share premium

:

• PetroChina:60% (overweighted)
• China Mobile:12% (underweighted)
• COSCO SHIPPING Holdings H-shares:12% (reasonable)
• ETF:16% (diversified allocation)

:

• Expected comprehensive dividend yield: approx.5.2%
• Moderate capital appreciation potential
• Relatively controllable risk

:

• PetroChina:40% (reduce concentration risk)
• China Mobile:25% (increase weight of high-quality leader)
• COSCO SHIPPING Holdings H-shares:20% (increase allocation of undervalued targets)
• ETF:15% (maintain market coverage)

:

• Single stock weight not exceeding40%
• Industry distribution limited to four sectors: energy, communication, industry, finance

:

• H-share allocation recommended to be within20%
• Consider exchange rate hedging tools

:

• Select targets with large average daily turnover
• Avoid small-cap or illiquid stocks

:

• Index breaks below3500-point support level
• Systemic correction risk
• Response Strategy: Build positions in batches, strictly implement stop-loss

:

• Energy price fluctuations affect PetroChina’s performance
• Completion of5G construction affects China Mobile’s growth rate
• Response Strategy: Track performance regularly, adjust positions timely

:

• Changes in industry regulatory policies
• Adjustments in exchange rate policies
• Response Strategy: Monitor policy trends, maintain flexibility

:

• Initial position building not exceeding30% of total capital
• Build positions in batches, avoid chasing highs
• Stop-loss line for single stock set at -15%

:

• Investment cycle set to12-18 months
• Regular evaluation (once per quarter)
• Gradually take profits after reaching target returns

In a market environment fluctuating between3500-4000 points, the undervalued high-dividend blue-chip investment strategy has a good risk-return ratio and is suitable for conservative investors.

:

• Strong defensiveness, relatively limited downside risk
• Dividend income provides stable cash flow
• Large room for valuation repair

:

• Capital appreciation speed may be slow
• Requires longer investment cycle
• High requirements for individual stock selection

:

• Phase1: Allocate40% of capital to core targets
• Phase2: Add30% positions during market corrections
• Phase3: Complete remaining30% after certainty increases

:

• Adjust weights according to changes in market environment
• Reduce positions appropriately after valuation repair
• Monitor new investment opportunities

:

• Take12-18 months as investment cycle
• Monitor changes in corporate fundamentals
• Maintain investment discipline, avoid frequent operations

In the current market environment, the undervalued high-dividend blue-chip investment strategy has a good risk-return ratio and is suitable for conservative investors. The key is to manage positions well and control risks, pursuing steady returns while ensuring a margin of safety.

[0] Jinling API Data
[1] Bloomberg - “Chinese Economy Shows Strength With EVs, Rare Earths, Robots” (https://www.bloomberg.com/features/2025-us-china-rivalry/)
[2] Bloomberg - “JPMorgan Upgrades China’s Stocks on Multiple Positive Drivers” (https://www.bloomberg.com/news/articles/2025-11-27/jpmorgan-upgrades-china-s-stocks-on-multiple-positive-drivers)