Market Review: Global stock indices mostly declined this week, with South Korea's KOSPI, Hong Kong's Hang Seng Tech Index, and Japan's Nikkei 225 leading the losses. A-share trading volume shrank further, with the average daily turnover of the Wind All-A Index falling to around 1.76 trillion yuan, reflecting cautious market sentiment. The STAR 50 and ChiNext indices were among the worst performers, while capital rotated into dividend-paying sectors. Financials and consumer staples rose, with retail, non-bank financials, beauty care, and social services leading gains among primary sectors. Growth stocks fell, with electronics and power equipment indices dropping over 3%. Commodities saw COMEX silver surge 8.7%, while copper and aluminum prices edged up, and coking coal rebounded from lows. In forex, the yen weakened against the dollar after the BOJ's rate hike, while the yuan continued appreciating.
Market Outlook: Conditions for a "Spring Rally" are accumulating, favoring bargain-hunting strategies. Historically, A-share spring rallies typically require: reasonable valuations, accommodative liquidity, and catalysts boosting risk appetite—such as domestic policies, industry events, or external risk mitigation. Currently, overseas factors like the Fed's rate cut and BOJ's hike have materialized, easing concerns about carry-trade reversals. Further catalysts may include foreign inflows driven by yuan appreciation and insurance capital entering markets during the traditional "good start" period for premium income. Recent large net inflows into equity ETFs and surging trading volumes of broad-based ETFs suggest incremental funds are positioning for upside.
1. Historical Context: Over the past decade (excluding 2021-2022), A-shares have shown a "Spring Rally" calendar effect. During year-end/New Year periods—a data vacuum between economic reports and earnings seasons—markets often chase thematic investments based on policy expectations. Eight spring rallies occurred from 2016-2025, typically starting December-January and lasting 20-60 trading days.
2. Exceptions: The 2021-2022 absence of rallies demonstrates that elevated valuations plus external shocks can derail the pattern. In early 2021, historically high valuations collided with global central bank tightening, triggering core asset corrections. Similarly in 2022, Fed hike expectations and the Russia-Ukraine conflict crushed risk appetite globally.
3. Key Conditions for Spring Rallies: - Reasonable valuations: The strongest rallies followed substantial pre-rally corrections (e.g., 2016's "circuit breaker" selloff, 2019's 10x P/E for CSI 300, 2024's liquidity shocks). - Accommodative liquidity: Examples include the PBOC's 2018 targeted RRR cuts, 2019-2020 broad easing, 2023 foreign inflows, and 2025 long-term capital market reforms. - Risk appetite catalysts: Policy/industry drivers like 2016 supply-side reforms, 2019 U.S.-China trade progress, 2020 Phase One deal, 2022 property stimulus, 2024 surprise LPR cuts, or 2025's AI/robotics trends.
4. Current Positive Signals: - Overseas liquidity: BOJ's dovish hike eased yen pressure; Fed's December cut suggests continued accommodative bias. - Domestic liquidity: China's Central Economic Work Conference reaffirmed "prudent easing," leaving room for RRR/rate cuts. - Micro-liquidity: Heavy ETF inflows and broad-based ETF trading volume boosts sentiment. Potential foreign inflows from yuan strength and insurance capital await. - Valuations: CSI 300's 14x P/E sits at the 76th percentile since 2010—below historical median +1SD. - Policy: The 2026 Five-Year Plan kickoff may spur tech innovation, anti-involution, and consumption policies.
Sector Recommendations: 1. Policy-backed growth: Import substitution, robotics, aerospace, biotech, energy storage. 2. "Anti-involution" beneficiaries: Chemicals, energy metals, resources. 3. Consumption: Potential stimulus-driven opportunities.
Risks: Global economic volatility, policy implementation delays, overseas liquidity shocks, geopolitics.
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