Core View: A regulatory "tap on the brakes" is not a full stop; rising governance standards pave the way for more sustainable market development. With declining risk-free returns, ongoing capital market reforms, and China's economic transformation, the "Transformation Bull" market still has significant room to run. We are bullish on leading companies in various sectors.
Summary ▶ Macro Outlook: China's "Transformation Bull" market is set to be higher, more stable, and longer-lasting. Since the start of 2026, the Shanghai Composite Index has consecutively broken through 4000 and 4100 points, demonstrating strong momentum. GTHT Strategy released a significant report on December 28, 2025, titled "Crossing Over, Gazing at New Peaks," which systematically reviewed and discussed our perspectives on the Chinese market since 2025. The resolution of "internal worries" in September 2024 and the handling of "external challenges" through Sino-US engagements in 2025 have alleviated societal concerns, forming a crucial prerequisite for the revaluation of Chinese equities. Compared to the 2019-2024 period, Chinese society since 2025 has exhibited greater external confidence, internal stability, and gradually stabilizing balance sheets. Consequently, the capital market now possesses a previously unseen capacity to consolidate social consensus and capital, acting as a key link connecting social capital with enhanced economic productivity and facilitating public participation in China's real-economy transformation. Positioned in a major development cycle, this forms the foundation of the "Transformation Bull." Furthermore, the breaking of implicit guarantees in Chinese society, the decline in risk-free returns, capital market reforms, and economic restructuring constitute the three key driving forces behind the "Transformation Bull." Therefore, GTHT maintains an optimistic and steadfast view on the Chinese market, believing the "Transformation Bull" still has substantial room for growth in 2026.
▶ A regulatory "tap on the brakes" is not a full stop; more prudent governance enables the Chinese market to develop more sustainably. On January 15, the China Securities Regulatory Commission (CSRC) held its 2026 system work conference, reiterating from 2025 the need to "consolidate the sound momentum of stable and improving performance," indicating the unchanged positive tone for capital market development; it also emphasized "resolutely preventing sharp market fluctuations." On January 18, CNR.cn published a commentary titled "Emphasizing Stability, A-Shares Need a 'Long Bull' Not a 'Crazy Bull'," stating that "the essence of regulatory cooling measures is not a 'full stop,' nor is it suppressing the market, but rather squeezing out bubbles, curbing speculation, and directing capital towards high-quality targets." The CSRC pointed out it will "actively guide long-term, rational, and value investing, and fully foster a market ecology where 'long-term money invests for the long term'," which indicates a significant improvement in the regulation and governance standards of China's capital markets. Throughout the prolonged development of the capital markets, stocks have historically experienced sharp rises and falls. The consequence of such volatility has not only resulted in short bull markets and long bear markets in China but also prevented the public from sharing in the dividends of real economic development and capital market reforms, thereby reducing investability. Thus, stricter and more prudent market regulation actually helps enhance the investability of the Chinese market and contributes to its longer-term sustainability, allowing more investors to benefit from the fruits of transformational development and reform.
▶ Sector Comparison: The year-end rally will not stop here; we are optimistic about leading tech sub-sector companies and the A500 Index. As China's economy gradually stabilizes and societal asset management demands emerge, opportunities exist in both tech and non-tech sectors, with improvements expected for leading sub-sector companies and heavyweight stock prices. We are bullish on: 1) Tech Growth. TSMC's better-than-expected Capex growth indirectly confirms that global AI computing demand remains in an upward phase, driving rapid growth in semiconductor equipment demand. Global chip technology breakthroughs and the continuing trend of memory price increases, coupled with domestic computing infrastructure shortages and an expected acceleration in localization, along with non-linear growth in token consumption by leading manufacturers, are positive. Recommendations: Hong Kong internet/electronics & semiconductors/communications/defense, and manufacturing companies with global competitive advantages expanding overseas: power equipment/machinery/automobiles & parts. 2) Non-Bank Financials: Benefiting from the shift of household deposits and growing wealth management demand, with capital market reforms boosting risk appetite. Recommendations: Insurance/brokerages. 3) Pro-Cyclical Sectors: Valuations and positioning are at low levels, with marginal improvements at the cyclical bottom, benefiting from policies to expand domestic demand. Recommendations: Food/retail/tourism services/hotels. Within cyclical sectors, we favor commodities with tight supply-demand dynamics and rising prices: Non-ferrous metals/chemicals.
▶ Thematic Recommendations: 1. Domestic Computing: Accelerated iteration of domestic large model products is driving capital expenditure;看好 domestic chips/AIDC/power equipment. 2. New Power Grids: State Grid's 15th Five-Year Plan investment exceeded expectations;看好 UHV/new energy storage/smart grids. 3. Robotics: Chinese robots made a strong showing at CES 2026, with multi-domain application scenarios materializing;看好本体 manufacturers and key components like dexterous hands/lead screws. 4. Domestic Consumption: The State Council executive meeting proposed accelerating the cultivation of service consumption;看好 tourism/hotels/aviation, etc.
▶ Risk Warning: Overseas economic recession exceeding expectations, global geopolitical uncertainty.
01 Macro Outlook: China's "Transformation Bull," Higher, More Stable, Longer-Lasting. Macro Outlook: China's "Transformation Bull" market is set to be higher, more stable, and longer-lasting. Since the start of 2026, the Shanghai Composite Index has consecutively broken through 4000 and 4100 points, demonstrating strong momentum. GTHT Strategy released a significant report on December 28, 2025, titled "Crossing Over, Gazing at New Peaks," which systematically reviewed and discussed our perspectives on the Chinese market since 2025. The resolution of "internal worries" in September 2024 and the handling of "external challenges" through Sino-US engagements in 2025 have alleviated societal concerns, forming a crucial prerequisite for the revaluation of Chinese equities. Compared to the 2019-2024 period, Chinese society since 2025 has exhibited greater external confidence, internal stability, and gradually stabilizing balance sheets. Consequently, the capital market now possesses a previously unseen capacity to consolidate social consensus and capital, acting as a key link connecting social capital with enhanced economic productivity and facilitating public participation in China's real-economy transformation. Positioned in a major development cycle, this forms the foundation of the "Transformation Bull." Furthermore, the breaking of implicit guarantees in Chinese society, the decline in risk-free returns, capital market reforms, and economic restructuring constitute the three key driving forces behind the "Transformation Bull." Therefore, GTHT maintains an optimistic and steadfast view on the Chinese market, believing the "Transformation Bull" still has substantial room for growth in 2026.
02 "Tap on the Brakes" is Not a "Full Stop," More Prudent Governance Enables a Longer-Term Chinese Market A regulatory "tap on the brakes" is not a full stop; more prudent governance enables the Chinese market to develop more sustainably. On January 15, the CSRC held its 2026 system work conference, reiterating from 2025 the need to "consolidate the sound momentum of stable and improving performance," indicating the unchanged positive tone for capital market development; it also emphasized "resolutely preventing sharp market fluctuations." On January 18, CNR.cn published a commentary titled "Emphasizing Stability, A-Shares Need a 'Long Bull' Not a 'Crazy Bull'," stating that "the essence of regulatory cooling measures is not a 'full stop,' nor is it suppressing the market, but rather squeezing out bubbles, curbing speculation, and directing capital towards high-quality targets." The CSRC pointed out it will "actively guide long-term, rational, and value investing, and fully foster a market ecology where 'long-term money invests for the long term'," which indicates a significant improvement in the regulation and governance standards of China's capital markets. Throughout the prolonged development of the capital markets, stocks have historically experienced sharp rises and falls. The consequence of such volatility has not only resulted in short bull markets and long bear markets in China but also prevented the public from sharing in the dividends of real economic development and capital market reforms, thereby reducing investability. Thus, stricter and more prudent market regulation actually helps enhance the investability of the Chinese market and contributes to its longer-term sustainability, allowing more investors to benefit from the fruits of transformational development and reform.
03 Sector Comparison: Year-End Rally Won't Stop Here, Bullish on Tech Sub-Sector Leaders and A500 Index The year-end rally will not stop here; we are optimistic about leading tech sub-sector companies and the A500 Index. As China's economy gradually stabilizes and societal asset management demands emerge, opportunities exist in both tech and non-tech sectors, with improvements expected for leading sub-sector companies and heavyweight stock prices. We are bullish on: 1) Tech Growth. TSMC's better-than-expected Capex growth indirectly confirms that global AI computing demand remains in an upward phase, driving rapid growth in semiconductor equipment demand. Global chip technology breakthroughs and the continuing trend of memory price increases, coupled with domestic computing infrastructure shortages and an expected acceleration in localization, along with non-linear growth in token consumption by leading manufacturers, are positive. Recommendations: Hong Kong internet/electronics & semiconductors/communications/defense, and manufacturing companies with global competitive advantages expanding overseas: power equipment/machinery/automobiles & parts. 2) Non-Bank Financials: Benefiting from the shift of household deposits and growing wealth management demand, with capital market reforms boosting risk appetite. Recommendations: Insurance/brokerages. 3) Pro-Cyclical Sectors: Valuations and positioning are at low levels, with marginal improvements at the cyclical bottom, benefiting from policies to expand domestic demand. Recommendations: Food/retail/tourism services/hotels. Within cyclical sectors, we favor commodities with tight supply-demand dynamics and rising prices: Non-ferrous metals/chemicals. Tech Growth: AI infrastructure and application景气 are向上, the AI semiconductor industry chain上下游 may experience协同爆发, and capital goods exports remain strong. Tech Growth remains the sector with the most marginal changes among Chinese assets and is the primary driver of the current profit recovery. 1) TSMC announced its 2025 results on January 15. In 2025, TSMC achieved卓越业绩 with revenue of $1220 billion (a significant 35.9% YoY increase) and a gross margin nearing 60%, driven by the strong爆发 of High-Performance Computing (HPC) business under the AI wave (annual revenue contribution rising to 58%) and the full-scale ramp-up of 3nm process technology. Benefiting from robust AI computing demand, revenue from advanced processes (7nm and below) accounted for 77% of total revenue, with 3nm and 5nm processes together contributing 63% of wafer sales revenue. Net profit attributable to the parent company reached NT$1.72 trillion, increasing over 30% YoY, hitting a record high. TSMC's 2025 capital expenditure reached $40.9 billion. Looking ahead to 2026, TSMC provided an aggressive Capex guidance, expecting 2026 Capex to rise to $52-56 billion, far exceeding previous market expectations of $45-48 billion, with 70%-80% allocated to advanced processes. TSMC's超预期 Capex growth indirectly confirms that global AI computing demand remains in a旺盛上升期, driving rapid growth in semiconductor equipment demand. Overseas AI infrastructure investment will provide strong拉动 for tech hardware demand. 2) According to Epoch AI data, there is a significant gap between China and the US in both per capita and per unit output computing scale and power scale. Domestic computing infrastructure remains短缺, and AI infrastructure still has vast growth space. Domestic substitution and investments in building the domestic AI ecosystem will拉动 demand for computing power, models, and applications. AI infrastructure expansion will also拉动 upstream materials and energy sectors (CCL/quartz fabric/power). 3) According to Epoch AI data, the growth rate of memory capacity and bandwidth follows the speed of computing performance improvement. Specifically, general-purpose GPU memory capacity doubles every 3.04 years, machine learning GPU memory capacity doubles every 4 years, while memory bandwidth doubles every 3.64 years and 4 years, respectively. The supply-demand imbalance for memory chips will benefit the accelerated development of the domestic memory industry. 4) Export Expansion: In December 2025, export growth (in USD terms) increased by 0.7 percentage points from November to 6.6%. Besides the boost from the significant RMB appreciation since November, consumer electronics and capital goods showed clear improvement. Consumer electronics exports rose by 16.3 percentage points YoY in December to 19.6%; US inventory replenishment and improved consumer demand in ASEAN also拉动 these exports. Simultaneously, the accelerated industrialization process in emerging economies and the shift of import share towards China continue to拉动 China's capital goods exports. In December, export growth rates for aluminum products, integrated circuits, and steel increased by 23.9, 13.6, and 3.5 percentage points to 14%, 47.7%, and 7.8%, respectively. This reflects the strong global competitive advantage of China's tech manufacturing products. AI investment drives up demand for energy infrastructure, and capital goods demand from overseas "re-industrialization" also continues to accelerate,有望 providing structural support for China's export growth. Beyond the AI computing产业链, the落地 of AI technology and policy support for embodied intelligence benefit smart driving/robotics from AI advancements and commercialization pace.
Big Finance: Benefiting from capital market reforms and incremental capital inflows, focus on the "good start" of Big Finance during the year-end攻势. Non-bank financials fully benefit from active capital market trading, while institutional allocations remain at low levels. In a trend of declining risk-free rates, investors are systematically increasing equity allocations. Capital market reforms further enhance the returns and stability of Chinese stocks institutionally, promote business innovation and regulatory relaxation in the financial structure, and the trend of incremental capital inflows and market活跃 is expected to continue. In an active capital market environment, the asset side elasticity of insurers is greater than their long-duration liability side, leading to improved profit growth, while brokerages' various businesses directly benefit from rising turnover and margin trading balances, as well as accelerated product innovation. Subsequently, as retail participation and financing activities (IPOs, M&A, etc.) gradually normalize, the retail and investment banking businesses of listed brokerages are expected to recover, with internationalization becoming a new growth engine for leading brokers. Brokerage earnings in 2026 are有望 to sustain high growth. For insurance, according to market institution research, new premium income for insurance companies this year has achieved significant growth compared to last year, with the "good start" performance far exceeding expectations. Combined with the hot sales of participating insurance and the trend of insurance funds increasing allocations to equity assets, the incremental funds flowing from insurance into the stock market are highly likely to increase. Therefore, with insurance being the most certain source of incremental funds for the stock market, the length and height of this bull market remain promising. Structurally, insurance is expected to primarily allocate to high-dividend stocks, then appropriately配置 to tech and growth sectors for弹性. Considering that the peak in household time deposits in 2023 are有望 to mature in 2026 (three-year deposits), under the pressure of deposit repricing, participating insurance, "fixed income+" bank wealth management products, etc., are有望 to become the "first baton"承接 household funds entering the market. The high growth景气 on the liability side is有望 to be an important catalyst for Big Finance in the "year-end攻势."
Consumption: The strategy to expand domestic demand is clearly positioned; recommend service consumption and mass-market goods. A recent important article by the General Secretary published in *Qiushi* magazine, "Expanding Domestic Demand is a Strategic Move," allows us to observe several key focuses of current efforts: 1) The most fundamental aspect of expanding consumption is promoting employment, improving social security, optimizing income distribution structure, expanding the middle-income group, and solidly advancing common prosperity. 2) Improving the mechanism for expanding investment, exploring effective investment spaces, using investment to drive economic vitality and growth space, and improving household income expectations. 3) Adapting to and meeting existing demand with autonomous, controllable, and high-quality supply, while creating and leading new demand, which requires further promoting innovation. Subsequent efforts to expand domestic demand will focus on improving residents' social security and optimizing the distribution structure on one hand, and optimizing supply to create new demand on the other. Therefore, we believe investment opportunities in the consumption sector重点 lie in innovation. Whether it's product innovation and channel innovation at the goods consumption level to better meet new consumption trends, or optimizing infrastructure for service consumption and creating superior service consumption scenarios like ice-snow economy and event economy, these directions not only align with policy guidance but also bring growth potential to consumption stocks. Additionally, it's important to recognize the high operating leverage and strongly cyclical business model characteristics of service consumption, which lead to greater profit elasticity when revenue recovers. Recent high-frequency data shows marginal improvements in metrics like Disneyland crowd density and airline load factors. Recommend mass-market goods with accelerating innovation iteration (snacks/beverages/restaurant supply chain), smart home appliances, and service consumption-related sectors like OTAs, hotels, and aviation/airports.
Cyclical Price Increase Chain: Pay attention to sectors with supply constraints and robust demand, such as non-ferrous metals/chemicals. Recently, several cyclical sectors with tightening supply-demand dynamics have shown明显的涨价现象, mainly concentrated in non-ferrous metals and chemicals. Specifically: 1) PTA, phosphorus chemicals. Due to restrictions like environmental requirements, capacity in the basic chemical industry remains constrained. With偏紧张 supply-demand dynamics, prices for petrochemical raw materials, intermediates, and some inorganic raw materials have risen明显. 2) We are看好 the long-term value of gold, copper, and aluminum as the most scarce resources among non-ferrous metals. The rise in precious metals and commodities is a feedback to currency and credit depreciation, forming the foundational force for the overall commodity rally: US fiscal discipline has loosened, with the deficit rate remaining high in a pro-cyclical state; monetary discipline continues to loosen. Over the next month to half a year, factors including IEEPA judicial rulings, whether the two parties can reach an agreement by month-end to avoid another government shutdown, and pressure from mid-term elections on whether the new Fed chair nomination and Powell's departure proceed smoothly, pose numerous tests for market confidence; simultaneously, we are bullish on metals with improving fundamentals. The rapid increase in power demand driven by AI significantly boosts prices for two types of non-ferrous metals: one is carriers like copper, silver, tungsten, tantalum, aluminum, etc., and the other is energy carriers like lithium, cobalt, nickel.
04 Thematic Recommendations: 4. Domestic Computing/New Power Grids/Robotics/Domestic Consumption 1. Domestic Computing: TSMC's results and Capex guidance exceeded expectations, strengthening the computing investment narrative; accelerated iteration of domestic models like Qwen and Doubao有望拉动 domestic computing investment demand. Investment Suggestion: TSMC's Capex scale有望超预期, boosting demand in the semiconductor advanced manufacturing产业链 related to computing; accelerated iteration of leading domestic large model products, with high growth in user numbers and daily data calls. TSMC's Q4 2025 net profit grew 35% YoY, beating expectations. It expects 2026 Capex to reach up to $56 billion, a significant 37% increase from the actual $40.9 billion in 2025, hitting a record high. Alibaba's Qwen APP is fully integrated into the Alibaba ecosystem, launching over 400 new features, achieving a closed loop from consumption decision-making and planning to transaction and execution. The performance leap of mature AI application products stimulates user demand, with accumulating active users and surging data calls有望带动 growth in domestic computing-related capital expenditure. Direction One: Leading domestic internet companies see maturity leaps in application products, increased Capex drives penetration of domestic computing chips. Direction Two: AIDC/data center power equipment benefiting from increased domestic intelligent computing investment. 2. New Power Grids: State Grid's "15th Five-Year Plan" investment scale exceeded expectations, China's new power system construction有望加速, promoting related power grid industry investment. Investment Suggestion: State Grid announced that fixed asset investment during the "15th Five-Year Plan" period is预计 to reach 4 trillion yuan, a 40% increase from "14th Five-Year Plan" investment,用于 new power system construction. During the "14th Five-Year Plan," China Southern Power Grid completed over 730 billion yuan in fixed asset investment, a 23% increase from the "13th Five-Year Plan." Previously, the Central Economic Work Conference proposed adhering to the "dual carbon" goals, promoting comprehensive green transformation. It called for formulating an energy power construction plan outline, accelerating the new energy system construction, and expanding green electricity application. According to national plans, the proportion of non-fossil energy consumption in China有望达 20% by 2025, and this proportion有望达 25% by 2030. Direction One: UHV/distribution equipment/new energy storage benefiting from increased power investment and inter-regional transmission investment. Direction Two: Smart grids and other digital-intelligent infrastructure benefiting from improved grid intelligence. 3. Robotics: Chinese robot "army" showcased at CES 2026; with multi-domain application scenarios落地, the robotics industry enters a scale development phase. Monitor Tesla产业链 trends;看好 new technology applications and component supply chain. Investment Suggestion: Chinese robot "army" showcased at CES 2026, with Beijing Humanoid Robot Innovation Center, Zhiyuan Robotics, Yuejiang Robotics, etc., displaying latest products and technologies. Driven by global resonance, the robotics industry is entering a phase of规模化应用. Repetitive, heavy, and dangerous industrial scenarios like搬运/分拣/巡检, and personalized consumer scenarios like home/companion, are accelerating落地. China's complete manufacturing supply chain advantage builds a foundation for technology and scale. Focus on two main lines: new technology applications and mass production capabilities of core本体 manufacturers. Direction One: Key links benefiting from technological upgrades: dexterous hands/lead screws/sensors/lightweight materials, etc. Direction Two: Core robotics supply chain companies with mass production capabilities, like Tesla, Unitree, Zhiyuan, etc. 4. Domestic Consumption: State Council executive meeting proposed accelerating the cultivation of new growth points in service consumption; the Central government proposed building a strong domestic market, expanding new spaces for domestic demand growth.看好 Tourism/hotels/aviation and mass consumer goods with improving sell-through. Investment Suggestion: Policy push and the rise of new scenarios make service consumption a new动能拉动 the economy. The State Council executive meeting proposed accelerating the cultivation of new growth points in service consumption, supporting the emergence of new业态新模式新场景, and increasing high-quality service supply. The Central Economic Work Conference proposed "adhering to domestic demand-led approach, building a strong domestic market. Deeply implement actions to boost consumption, formulate and implement plans to increase urban and rural residents' income." New demand leads new supply, new supply creates new demand. New consumption scenarios like sports events/ice-snow tourism/performance culture tourism continue to rise in China. The spillover effect of "Su Chao" is显著; Liaoning Provincial Committee proposed hosting "Dongbei Chao," striving to build an influential national football event brand. Direction One: Tourism/hotels/OTAs/duty-free/aviation benefiting from pro-consumption policies and holiday policy optimization. Direction Two: Gaming/trendy toys/mass consumer goods with improving sell-through, benefiting from high growth in emotional value consumption and bottom recovery in mass consumption.
05 Risk Warning Risk Warning: Overseas economic recession exceeding expectations, global geopolitical uncertainty.
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