Chinese stocks rally to four-year high in strong start to 2026

Materials and technology shares were among the day’s best performers.

• Chinese stocks surge on AI optimism and economic recovery signs
• CSI 300 hits 4-year high; Shanghai Composite strongest since 2015
• AI and tech stocks surged, buoyed by positive investor sentiment

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Chinese stocks climbed to multi-year highs, fueled by sustained optimism over the country’s AI advances and emerging signs of an economic recovery.

The benchmark CSI 300 Index advanced as much as 1.2%, reaching its highest level in four years, while the Shanghai Composite Index rose 1.2% to its strongest since July 2015. Materials and technology shares were among the day’s best performers.

Buoyed by upbeat manufacturing activity, President Xi Jinping’s positive assessment of the economy and a continued rally in the artificial intelligence trade, 2026 has started off with no shortage of optimism. Investors expect the upward momentum that made Chinese equities a global standout last year to extend, thanks to Beijing’s backing for key sectors and measures to revive the ailing property market.

“Sentiment has been improving as a few things have come together at once,” said Billy Leung, an investment strategist at Global X Management. “Policy visibility has increased earlier than usual, positioning was very light into year-end and there are early signs that parts of the economy, particularly manufacturing, are stabilizing.”

Turnover in the onshore market hit 2.5 trillion yuan ($364.6 billion) on Monday, the biggest since mid-October, while outstanding loans taken out by investors to purchase stocks hovered around a record high.

Tuesday’s gains come amid another strong day in global markets, with various indexes climbing to fresh highs despite tensions brewing in Latin America. Tech shares, particularly those tied to the AI supply chain, remained in focus.

The rally, however, has started to show signs of overheating. The 14-day relative strength index, a momentum indicator, on the Shanghai Composite climbed above 74 on Tuesday, entering technical overbought territory for the first time since early September. The CSI 300 is approaching that level too, which was last breached in October.

Still, those worries for now are being overshadowed by investors’ conviction that more upside lies ahead. A robust listing pipeline of onshore AI-related companies will likely keep sentiment buoyant following two blockbuster trading debuts last month. Among them are ChangXin Memory Technologies Inc. and Yangtze Memory Technologies Co., each of which may seek a valuation of 200 billion yuan to 300 billion yuan, respectively.

Optimism around Chinese AI has only grown this year, helped by DeepSeek’s paper outlining a more efficient approach to development and the increasing international popularity of Kuaishou Technology’s video AI app.

“I think DeepSeek is making a breakthrough, and many other Chinese AI companies are making breakthroughs as well,” Hao Hong, chief investment officer at Lotus Asset Management, said on Bloomberg TV. Liquidity continues to rise, creating a positive environment conducive for risk taking, he added.

As stocks rallied, investors also pulled back from Chinese government bonds, pushing yields on the 10-year note up 2 basis points to 1.87%.