Bao Chengchao of CITIC Securities: Valuations of large-cap blue-chip stocks in China remain at relatively low levels, wi

CITIC Securities chief strategist Bao Chengchao said domestic large-cap blue-chip valuations remain at low levels, with domestic-demand and manufacturing blue chips offering the most room for recovery. As of October 22, 2026, A-shares were the only market among the US, Japan, South Korea and China where the AI-over-non-AI valuation premium still exceeded its historical median, with the A-share AI/non-AI P/E ratio at 4.4x, in the 82nd percentile since 2016, versus the 1st, 17th and 24th percentiles in the US, Japan and South Korea. Overseas AI premiums have largely been absorbed by rising non-AI valuations, with US and Japanese non-AI non-financial blue chips trading at P/Es of 33.5x and 23.0x, in the 98th and 95th historical percentiles, while A-share non-AI blue chips tied to domestic demand and manufacturing trade at just 15.6x, in the 21st percentile. Bao said this divergence indicates the greatest revaluation potential sits in domestic-demand and manufacturing large caps, though realizing it requires supportive macro conditions. He pointed to a potential inflection in the overseas AI capex cycle that could pull down long-term US Treasury yields, alongside clearer fiscal-monetary policy coordination in China prioritizing demand expansion, and said a resonance between falling overseas rates and domestic economic recovery could lift both earnings expectations and valuation constraints for A-share large caps.