China's three major stock indices opened lower in Tuesday's session. The Shanghai Composite Index fell by 0.43%, while the ChiNext Index dropped by 1.23%. On the market, the tourism sector showed active performance, with Wuhan Sante Cableway Group Co.,Ltd. rising over 3%. In contrast, sectors such as lithium mining and semiconductors experienced significant pullbacks, with Tianqi Lithium Corporation declining more than 2%.
Looking ahead, Shenwan Hongyuan Group noted that during the Spring Festival holiday, multiple factors continued to suppress overall risk appetite, and short-term adjustments may persist after the holiday. The firm maintains its view that a "second phase of market rise" is still possible in the medium term, potentially starting around mid-2026. Once the lower bound of the current fluctuation range is identified, preparations can begin for this second phase, opening a window for allocation based on medium-term opportunities. This phase is expected to start gradually, allowing for measured investment positioning.
Key events in March, including the Two Sessions, and the observation window for U.S.-China relations around late March and early April, may present rebound opportunities within a fluctuating market. During such periods, the best opportunities lie in emerging technology trends, particularly those that demonstrated new momentum during the holiday. These areas represent short-term structural opportunities, with focus on the robotics industry (where valuations remain reasonable), AI large models (with potential diffusion into AI applications in A-shares), and memory storage. Additionally, rising concerns over U.S.-Iran tensions warrant attention to oil and oil shipping sectors. For medium-term allocation, high-growth tech and cyclical alpha sectors remain favorable, along with revaluation opportunities in non-bank financials.
Industrial Securities expressed optimism, stating that A-shares have already priced in some risks following pre-holiday adjustments in line with overseas assets. Post-holiday, A-shares are entering a period of high probability for gains, supported by factors such as finalized U.S. tariff policies and former President Trump’s China visit schedule, which bolster risk appetite. Domestic macroeconomic and industry-specific catalysts are also expected to guide market structure, reinforcing expectations for a new upward trend.
Oriental Securities highlighted that accelerated sector rotation since the start of the year—spanning robotics, dividend and cyclical stocks, new energy, and commercial aerospace—reflects declining risk appetite and may increase market volatility. While indices still have potential to rise, stocks that have surged sharply in the short term may warrant reducing positions. Strategically, the firm recommends focusing on sectors with clear medium-term industrial trends and cyclical price increases.
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