• Two Sessions Policy Anchors: The 2026 Two Sessions reinforce a supportive macro backdrop, with GDP growth set at a 4.5%–5% range, a 4% fiscal deficit for a second year, and public expenditure exceeding RMB 30 trillion. Monetary policy shifts toward proactive use of easing tools, while “Building a Powerful Domestic Market” is elevated as a top priority, signalling stronger support for domestic demand recovery.
•   Valuation Trough & Earnings Recovery: CSI 300 valuations remain at historically low levels with a discount to global peers. EPS growth is expected to re-accelerate from 9% in 2026 to 12% in 2027, reflecting an early-cycle earnings recovery that is the key driver of returns.
• Balanced Sector Structure: The index combines defensive Financials, at low valuations with high dividend support, and growth-oriented Information Technology, which benefits from strong policy tailwinds. Together, they account for over one-quarter of index weight, providing a built-in balance of stability and growth.
• Valuation & Target: Applying a 15x fair P/E to 2028E EPS of RMB 1.47 implies a CSI 300 target of 6,285 points, or ~28% upside over three years. Returns are primarily driven by earnings growth rather than valuation expansion.

Two Sessions Policy: The 15th Five-Year Plan Begins — Macroeconomic Policy Framework Systematically Restructured

GDP Target Becomes Range-Based — Quality Prioritised Over Speed

The 2026 National Two Sessions set China’s GDP growth target at 4.5%–5%, marking the first use of a range target in recent years. This should not be interpreted as a downgrade in growth ambition, but rather as a signal of policy maturation. In 2025, China successfully achieved its 5% growth target while total output exceeded RMB 140 trillion for the first time, reducing the need for a rigid headline figure to demonstrate growth capability. The shift toward a range target reflects a clearer policy preference: prioritising growth quality over sheer speed, while also reducing the risk of excessive stimulus simply to defend a fixed target.

The fiscal stance remains expansionary. The fiscal deficit ratio is maintained at around 4% for a second consecutive year — historically well above the long-term sub-3% norm — suggesting that elevated fiscal support is becoming structural rather than cyclical. In concrete terms, fiscal support continues to scale up:

·       The deficit increases from RMB 5.66 trillion in 2025 to RMB 5.89 trillion

·       General public budget expenditure exceeds RMB 30 trillion for the first time

·       RMB 1.3 trillion in ultra-long-term special government bonds is allocated, primarily toward technology innovation and strategic infrastructure

·       RMB 800 billion in new-type policy financial instruments is expected to generate ~3x leverage into real activity

Monetary Policy: Certainty of Proactive Easing Has Risen Significantly

The policy language was upgraded from “timely use of RRR and rate cuts” to “flexible and efficient use of multiple tools, including RRR cuts and interest rate reductions”, signalling an important shift: rate cuts are no longer framed as purely reactive stabilisation measures, but as proactively deployed policy instruments. This implies a higher degree of policy readiness to ease, with market confidence in the likelihood of further monetary loosening materially increasing. Consensus among market institutions generally points to cumulative rate cuts of around 20–30bps over the course of the year, likely implemented in a staggered manner across the first and second half, alongside potential targeted easing in mortgage pricing via administrative guidance on the 5-year-plus LPR.

The transmission from policy rate declines to CSI 300 performance needs to be assessed through the balance-sheet dynamics of the banking system rather than in isolation. In recent years, the People’s Bank of China (PBoC) has repeatedly lowered the Loan Prime Rate (LPR) to support credit demand from the real economy, thereby transmitting monetary easing into lower borrowing costs for corporates and households. However, this has also exerted downward pressure on banks’ asset yields, as loan interest income declines in tandem with lending rates.

On the liability side, deposit rates have often adjusted more slowly and less fully, meaning banks’ funding costs have not fallen proportionately. The resulting asymmetry compresses banks’ net interest margins (NIM), as the spread between lending yields and deposit costs narrows. This margin compression is a key channel through which monetary easing can exert pressure on banking profitability, and by extension, influence equity market transmission effects into indices such as the CSI 300, where financials remain a significant weight.

Capital Market Reform: Long-Term Capital Inflows Open an Incremental Source

The Two Sessions Government Work Report explicitly called for further improving mechanisms to channel long-term capital into the equity market, broadening exit pathways for private equity and venture capital, and increasing the share of direct and equity financing within the broader financial system. Against this policy backdrop, incremental inflows from institutional capital are expected to accelerate. Wealth management products, trusts, insurance funds, and other asset management vehicles are likely to increase their allocation to onshore equities as regulatory and structural channels continue to open up.

This gradual reallocation should support a meaningful improvement in the investor base of the A-share market, shifting it away from a dominance of short-term, trading-driven participation toward more stable, institutionally anchored capital. Over time, this evolution is expected to reduce volatility associated with speculative flows and strengthen the pricing power of fundamental analysis, thereby creating more supportive conditions for a sustained re-rating of value-oriented investment styles.

CSI 300: Dual tailwinds from valuation upside and earnings acceleration

Global Valuation Comparison: CSI 300 Discount Highlights Allocation Appeal

From a cross-sectional valuation perspective across major global equity indices, the CSI 300 stands out with a clear valuation discount. According to Bloomberg, it currently trades at a forward P/E of approximately 15.8x, notably below the S&P 500 (~22.2x) and Nasdaq 100 (~26.6x) in the US, Japan’s TOPIX (~18.1x) and Nikkei 225 (~22.9x), as well as the MSCI World Index (~18.9x). This positions the CSI 300 at a meaningful relative valuation gap in a global context.

Beyond valuation support, dividend contribution is an increasingly important component of total return. The index’s trailing 12-month dividend yield is approximately 2.63% (iFinD), while total cash dividends continue to expand, reaching RMB 1,912.3 billion in 2025 (+5.12% YoY). At the same time, the payout ratio has steadily increased from 35.99% in 2021 to 41.13% in 2025.

Taken together, rising earnings, higher absolute dividends, and a gradually improving payout ratio provide a dual engine of return — combining valuation-supported upside potential with a steadily strengthening and increasingly reliable income stream.

Accelerating Earnings Recovery

The CSI 300 comprises the 300 largest and most profitable A-share blue-chip companies, with aggregate earnings historically growing at roughly 1.5–2x nominal GDP. Entering the first year of the 15th Five-Year Plan, a combination of fiscal expansion, monetary easing, and capital market reform is expected to enhance policy transmission efficiency and support a broad-based earnings recovery.

Our model projects CSI 300 EPS growth of ~9% in 2026, up from ~6% in 2025, driven mainly by fiscal stimulus supporting Industrials and easing conditions improving Financials’ net interest margins. Growth is expected to further accelerate to ~12% in 2027, reflecting broader spillovers from public investment and continued expansion in AI-driven earnings within the Information Technology sector.

From a sector perspective, the key policy beneficiaries—Information Technology (AI implementation), Financials (easing cycle and capital market reform), Industrials (new productive forces and AI industrialisation), and Materials (supply-side consolidation)—account for the majority of CSI 300 weight. This broad sector participation supports a more balanced and durable earnings recovery, in contrast to the concentration risks seen in single-theme or single-sector exposures.

Recommended Product: E Fund CSI 300 ETF (510310.SH)

Fund Profile: Market-Leading Scale and Deep Liquidity Within the CSI 300 ETF Segment

E Fund CSI 300 ETF (510310.SH), established on 6 March 2013, is the largest CSI 300 index ETF in the A-share market, with total AUM exceeding RMB 300.2 billion as of April 2026. Fund manager E Fund Management Co., Ltd., established in 2001, manages assets exceeding RMB 3 trillion. The fund is co-managed by Yu Haiyan and Pang Yaping (both serving since 16 April 2016). In terms of fees: management fee 0.15% per year, custodian fee 0.05% per year, total expense ratio approximately 0.20% per year — among the lowest in the market for comparable products.

Asset Allocation and Portfolio Structure: High Equity Ratio, Minimising Cash Drag

The CSI 300 Index tracks the 300 largest A-share companies listed on the Shanghai and Shenzhen exchanges, with broad sector representation across Information Technology (26.9%), Financials (19.4%), Industrials (18.1%), Materials (10.4%), and other key industries. It is widely regarded as the most representative large-cap blue-chip benchmark of the onshore Chinese equity market.

On the portfolio side, the fund has consistently maintained near-full equity exposure, with allocation to equities remaining in the 98%–100% range across all quarters since inception. As of 31 December 2025, equity exposure stood at 99.21% of NAV, while combined allocations to cash and bonds remained below 1%. This high-conviction positioning ensures investors receive close-to-uninterrupted beta exposure to CSI 300 performance.

The portfolio remains well diversified, with the top 10 holdings accounting for approximately 22.74% of NAV. Within this structure, the fund exhibits a balanced “growth-plus-defensives” profile: high-growth technology and innovation names such as CATL, Zhongji Innolight, and Eoptolink Technology provide earnings sensitivity to AI and advanced manufacturing cycles, while established blue-chip franchises such as Kweichow Moutai, China Merchants Bank, Industrial Bank, and Yangtze Power contribute earnings stability and defensive ballast across market cycles.

Source: iFinD, iFAST Research compilations

Data as of 31 December 2025

The chart below illustrates the historical evolution of the top 10 holdings as a percentage of fund NAV, which has remained broadly stable in the 19%–27% range over the long term. This indicates a consistently controlled concentration profile through different market environments.

Compared with sector- or theme-focused ETFs, the fund exhibits meaningfully lower concentration risk, reflecting a deliberately diversified construction approach. This structure helps mitigate idiosyncratic single-name volatility while maintaining sufficient active positioning to express conviction where appropriate, resulting in a more balanced risk-return profile across market cycles.

Historical Performance: Close Tracking of the CSI 300 Total Return Index

The table below summarises the fund’s performance across major time horizons (as of 10 April 2026). The benchmark used is the CSI 300 Total Return Index (with dividends reinvested), consistent with the fund’s NAV calculation methodology, allowing for a precise assessment of tracking quality on a like-for-like basis.

Overall, the fund has closely replicated benchmark performance across all key periods, demonstrating consistently tight index replication. The annualised tracking error is approximately 0.3 percentage points, indicating tracking precision that is among the best-in-class for passive index-tracking products in the market.

Source: iFinD, iFAST Research compilations

Data as of 10 April 2026

In the table above, the 3-year and 5-year returns are presented as geometric mean annualised figures to ensure comparability across different market cycles. The results indicate that the ETF’s NAV has closely tracked the CSI 300 Total Return Index (with dividend reinvestment) over all observed horizons, with annualised tracking deviation consistently contained within an extremely narrow range, largely within ±0.3 percentage points. Since inception, the cumulative annualised deviation has averaged approximately -0.1% per year, underscoring a high degree of precision in passive replication.

The accompanying charts further reinforce this conclusion. The annual return comparison between the ETF and the total return benchmark from 2016 to the present shows closely aligned performance patterns, with the bar charts illustrating that year-on-year tracking deviation has remained stably bounded within a tight ±0.4% range over the long term. This level of consistency highlights robust index-tracking efficiency across varying market conditions.

* Green dots above bars indicate annual excess returns (Alpha)

Source: iFinD, iFAST Research compilations

Data as of 10 April 2026

Under Quantitative Model Screening, E Fund CSI 300 ETF Ranks First Overall

We adopt a systematic quantitative framework to evaluate all A-share ETFs tracking the CSI 300 Index, based on a three-year observation period from 31 March 2023 to 31 March 2026, covering a total of 26 comparable products. The screening methodology is structured across four key dimensions:

Expense ratio (weight 40%) is the most heavily weighted factor, reflecting its direct impact on long-term holding costs. Even marginal differences in fees can have a meaningful effect on compounded returns over time. Liquidity is assessed through a combination of bid–ask spread (15%) and average trading volume over the past 90 days (15%), jointly capturing both transaction cost efficiency and secondary market depth — a particularly important consideration for institutional-scale allocation and rebalancing.

Tracking precision is measured using three-year tracking difference (30%), which reflects the cumulative execution quality of the passive replication strategy over a full market cycle, rather than short-term deviations.

Based on this four-dimensional framework, the E Fund CSI 300 ETF (510310.SH) ranks highest among the 26 peer A-share CSI 300 ETFs. Its key strengths include a highly competitive total expense ratio of 0.20% per annum, jointly the lowest in the market alongside 510300; exceptionally strong liquidity, with a bid–ask spread of approximately 0.029% and average daily trading volume of around 595 million shares over the past 90 days (second only to 510300 at 1.13 billion shares), providing sufficient depth for institutional trading and allocation needs; and consistently strong tracking precision, reinforcing its positioning as a high-quality, low-cost, and highly liquid core CSI 300 ETF option.

Valuation and Three-Year Return Potential

Earnings Forecast Model

Based on the constituent-weighted EPS of the CSI 300 Index (000300.SH), combined with macroeconomic assumptions and sector earnings recovery trajectories under the Two Sessions policy framework, we construct a three-year forward earnings projection framework. The table additionally incorporates a dividend yield row to provide a more complete decomposition of total return over the holding period.

The 2025 dividend yield is based on actual data from iFinD, while the 2026–2028 assumptions are our estimates, derived from a conservative ~40% payout ratio assumption. This allows for a consistent and comparable framework for evaluating income contribution alongside earnings growth over time.

¹ Dividend Yield: 2025 actual figure sourced from iFinD (CSI 300 trailing 12-month dividend yield); 2026–2028 forecasts are based on EPS multiplied by approximately 40% payout ratio, divided by estimated index level — iFAST estimates, actual figures will vary with market price movements.

Source: iFinD, iFAST Financial Research compilations

Data as of 14 May 2026

Target Valuation and Three-Year Return Potential

This framework is anchored to a long-term fair valuation assumption of approximately 15x forward earnings, which we view as a stable equilibrium multiple reflecting the CSI 300’s composite earnings quality, structural ROE profile, and dividend yield characteristics. In this context, valuation is expected to remain broadly range-bound around this level, supported by policy stability and the ongoing rebalancing of China’s growth drivers under the Two Sessions policy agenda. This reduces the likelihood of sustained multiple expansion, while providing a clear and defensible valuation anchor for long-term investors.

Based on this 15x steady-state P/E assumption and our 2028E EPS forecast of RMB 1.47, we derive a three-year CSI 300 target of 6,285 points, compared with the index level of 4,914.60 as of 14 May 2026. This implies approximately 28% upside over the period.

Importantly, the return profile is predominantly earnings-driven. EPS is projected to increase from RMB 1.14 in 2025 to RMB 1.47 in 2028, representing cumulative growth of roughly +29%. This means that even under a largely unchanged valuation multiple, earnings expansion alone accounts for the bulk of the index’s return potential. As such, the investment case is primarily supported by structural EPS growth rather than valuation re-rating, reinforcing a return profile that is more stable and fundamentally driven over the medium term.

Risk Factors

•       Domestic Demand Policy Transmission Below Expectations: The February 2026 Manufacturing PMI came in at 49.0, still below the expansion-contraction threshold. If domestic demand stimulus policies transmit slowly, the pace of corporate earnings recovery may lag forecasts and affect the EPS trajectory.

•       Trade and Geopolitical Risks: Further escalation of US tariffs, or an expansion of US-China technology friction, could put downward pressure on earnings forecasts for export-oriented index constituents and periodically suppress market risk appetite.

•       Macro Volatility and Financial Risk: If the pace of domestic property market recovery is slower than expected, or the process of resolving local government debt risks is uneven, this could constrain the valuation recovery of the Financials sector, which accounts for approximately 19.4% of index weight — which could meaningfully affect overall index performance.