On the morning of January 5, the Shanghai Composite Index opened higher and continued to climb, breaking through the 4000-point mark again after a significant volume-driven surge, with the combined half-day turnover of Shanghai, Shenzhen, and Beijing markets reaching 1.65 trillion yuan.
The Shanghai Composite Index rose 1.07%, closing at 4011 points at midday, while the STAR 50 Index gained 4.05%, finishing at 1399 points by noon.
The "spring rally" appears to have started earlier than usual, yet the bull market structure remains intact. Industry insiders attribute this to several factors: the steady appreciation of the renminbi, ample domestic liquidity, optimistic economic recovery expectations, supportive policy measures, and continued willingness of funds such as insurance and ETFs to increase positions, suggesting that A-shares are likely to maintain their positive trajectory in January.
Yu Fenghui, an advisor to the HK 100 Research Center, noted that the fundamentals of A-shares remain robust, supported by a favorable policy environment and liquidity conditions. A stable renminbi exchange rate and ongoing domestic economic recovery are bolstering the market. Year-end rallies typically benefit from capital repatriation, improved corporate earnings expectations, and policy support, with this year exhibiting similar characteristics. Emerging sectors such as semiconductors, artificial intelligence, and new energy are worth watching, as they may serve as key drivers for market gains. As fiscal and monetary policies for 2026 become clearer, investor confidence is expected to strengthen, further fueling the year-end rally. Despite potential short-term fluctuations, the overall trend remains positive under current conditions.
Li Zeming, Investment Director at Red Ant Capital, stated that the upward momentum in A-shares is likely to continue after the turn of the year, as year-end liquidity tightness eases and capital inflows into the stock market accelerate. He recommended focusing on AI-related targets, including chips, power and network equipment, as well as large-scale and vertical model enterprises.
"With the spring rally kicking off ahead of schedule, the bull market pattern remains unchanged," said Li Lifeng, a strategist at Huaxi Securities. The beginning of the year marks the "good start" period for insurance capital allocation, and against a backdrop of favorable policy expectations, incremental funds show strong willingness to enter the market. The steady appreciation of the renminbi is attracting foreign capital back into A-shares and Hong Kong stocks, leading to a potential revaluation of "renminbi assets." Banks typically ramp up credit issuance early in the year, which helps improve liquidity expectations for the real economy and enterprises. 2026 is set to be a year of multiple positive factors converging, with a solid foundation for the bull market, and the spring rally has already begun to unfold ahead of time: first, at the macro-policy cycle level, as the inaugural year of the 15th Five-Year Plan, multiple departments are intensively rolling out supporting industrial policies and investment plans, with coordinated fiscal and monetary policies creating a friendly liquidity environment for the market; second, on the capital front, institutional funds represented by equity ETFs rushed in during December, followed by insurance capital's "good start" coupled with exchange rate appreciation driving foreign capital back, which is expected to reinforce the spring rally trend.
Bosera Funds indicated that for A-shares, the resolution of domestic and international macro events, along with the easing of structural market differentiation, has spurred a recent rebound. Given the positive tone set by the Central Economic Work Conference and the continued appreciation of the renminbi, they remain optimistic about the market's prospects. Structurally, while a further recovery in PPI and corporate profits may take time, the technology and growth sectors—after a reduction in crowding—are expected to outperform.
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