(Yicai) Oct. 10 -- Chinese mainland-listed stocks climbed on the first trading day after the Golden Week national holiday yesterday, with the Shanghai benchmark reaching a 10-year high for the second time in two months. Analysts expect the upward march in share prices to go on through this quarter.

The Shanghai Composite Index [SHA: 000001] closed up 1.3 percent at 3,933.94 yesterday, the highest since August 2015, but retreated almost 1 percent today to 3,897.03. The index, which also reached a 10-year high on Aug. 18, has gained about 17 percent so far this year.

The Shenzhen Component Index [SHE: 399001] added 0.5 percent to 13,725.56 yesterday, while the ChiNext Index [SHE: 399006] jumped 0.7 percent to 3,261.82. They sank 2.7 percent and 4.6 percent today, but are still up around 28 percent and 45 percent so far this year.

“Our view that the market is in the second bullish stage hasn’t changed,” said Zhang Xia, chief strategy analyst at China Merchants Securities. “Persistent inflows of new capital remain the key force driving steady gains.”

So-called A-shares, those listed on mainland stock exchanges, “still trade at relatively low levels,” a staffer at investment firm Maxwealth Fund Management told Yicai. “With clear themes such as artificial intelligence, innovative drugs, and robotics, and the phased easing of the China-US relations, mid-term risk appetite should remain supported.”

This quarter will see a dense policy calendar and third-quarter corporate earnings reports. Policy expectations for the quarter are broadly positive, according to insiders, who note that China is entering the policy roll-out period for the 15th Five-Year Plan, during which targeted industrial policies are expected to provide new thematic investment opportunities.

Foreign capital has shown a strong interest in China’s capital markets. “We’ve done multiple roadshows in the United States and Asia over the past month, engaging with investors with diverse goals,” said Wang Zonghao, head of China equity strategy research at UBS Investment Bank. “In general, investors have shown strong interest in Chinese stocks, with more and more of them agreeing with our more optimistic outlook.”

UBS Investment has observed that foreign investor interest in the Chinese market is at its highest in recent years. Over the past month, interest has broadened beyond internet and consumer stocks to include themes such as anti-involution competition, AI, and capital returns, Wang said.

“Our overweight stance on technology, media, and telecom stocks has attracted major investor attention,” Wang added, noting that there remains room for further global capital inflows into the Chinese market.

The market’s recovery has accelerated the issuance of mutual funds. New fund launches in the first three quarters nearly doubled from a year earlier, while total fundraising surged about 90 percent.

Brokers continue to favour AI computing power and semiconductors stocks this quarter, as well as names positioned to benefit from anti-involution competition.

The Fourth Plenary Session of the 19th Central Committee of the Communist Party of China and third-quarter financial reports will be the key highlights of this month, Zhang said.

Regardless of whether new policy announcements or third-quarter earnings results fully meet expectations, Zhang said investors will likely stay focused on themes such as AI computing power and applications, semiconductor self-reliance, solid-state batteries, commercial aerospace, and controlled nuclear-fusion technologies.

Editor: Futura Costaglione