HSBC Research released a report upgrading its rating on the mainland market from 'Neutral' to 'Shareholding', indicating that the authorities have introduced a series of bold stimulus measures, marking a turning point in the market and possibly providing a window to outperform the broader market. The current valuation of the mainland market is still attractive, and it's not too late to enter.

HSBC Research believes that whether these policy measures can ultimately address structural impediments and real estate issues is currently not important. The key is that the mainland has formulated policies that will play an important catalytic role in undervalued market and undervalued market segments.

The report points out that after the FTSE China ​indices rebounded by 28% in the past two weeks, some investors wonder if the ship has already sailed. The bank disagrees, analyzing the history of 30 rebounds of 10% or more in the FTSE China ​indices since 2005, showing an average rebound duration of 76 trading days and an average increase of 38%, with at least a quarter of the rebounds approaching a 60% increase. Therefore, China's valuation still remains attractive, with a discount rate of 18% compared to emerging markets, while the historical discount rate is 5%.

The bank's valuation model shows that based on fundamental factors, the mainland market is still undervalued by 15%. Investors currently underweight the mainland market by 230 basis points, which is 10% lower than historical levels, indicating potential inflows into the market. From the perspective of industries and factors, the bank prefers growth industries, including film & television, information technology, beneficiaries of state-owned enterprise reforms such as telecommunications, and high dividend yield stocks.