China has privately asked Iran to use its influence to help rein in Yemen's Houthis. The request follows an appeal from Saudi Arabia to Beijing regarding the conflict.

Diplomatic Engagement

According to a Reuters exclusive, the Chinese government initiated private discussions with Iran. The aim is to leverage Tehran's influence over the Houthi rebels in Yemen. This diplomatic move comes after Saudi Arabia made a direct appeal to Beijing for assistance in managing the regional instability.

Investor sentiment in China’s A-share market turned cautious in the third quarter of 2026, with expectations for returns falling even as corporate earnings began to recover.

The Cheung Kong Graduate School of Business (CKGSB) Investor Sentiment Survey, covering May to September 2026, revealed that respondents lowered their outlook for A-share gains. The proportion of investors expecting prices to rise fell to 58.6%, down 5.2 percentage points from April 2026. Expected rates of return dropped 1.8 percentage points to negative 0.7%.

Divergence Between Trading Activity and Valuation

While sentiment cooled, trading activity intensified significantly over the past two years. From December 2024 to August 2026, turnover ratios for the Shanghai Composite Index rose from 2.39 to 4.2. The Shenzhen Composite Index saw its turnover ratio climb from 5.84 to 8.5.

However, valuation metrics did not keep pace with this volume surge. Price-to-book ratios increased only modestly during the same period:

Liu Jing, CKGSB Professor of Accounting and Finance, interpreted this divergence as evidence of sharp disagreement among investors regarding whether current prices represent value or risk, rather than broad-based optimism.

What the Numbers Show

A clear disconnect exists between fundamental recovery and investor appetite. While trailing twelve-month net profit growth for A-share listed companies reached 5.9% in June 2026—ending a negative streak from June 2022 through March 2026—investor willingness to deploy capital declined. Specifically, the net proportion of investors seeking to increase direct stock holdings fell 7.3 percentage points to 10.7%, while equity fund allocations dropped 1.2 percentage points to 13.4%. This suggests that improving corporate profitability has not yet translated into renewed confidence among retail and institutional participants.

Sectoral Profit Recovery

Corporate earnings showed strength in specific segments during Q2 2026. Private enterprises recorded net profit growth of 36.7%, while strategic emerging industries saw growth of 36%. Despite these operational improvements, the survey indicates fragile confidence beyond equities, citing softer household consumption and a prolonged property adjustment.

The data also highlights a structural imbalance in capital allocation. Although private enterprises and consumers are needed to drive demand, financial capital continues to flow disproportionately toward government bodies and state-owned enterprises (SOEs). The survey notes that directing more capital to the public sector is unlikely to address insufficient demand, as SOEs primarily support the investment side of the economy.