The Shanghai Composite Index has recorded seven consecutive positive closes since December 17th, indicating a clear warming of market sentiment. Multiple signals suggest that a classic "year-end to spring" market trend is brewing and has gradually begun to unfold. Research reports from several brokerages, including Huaxi Securities, China Merchants Securities, and Guosen Securities Co.,Ltd., unanimously agree that A-shares are currently in a trading window most detached from full-year fundamentals, with the 2026 spring rally expected to be moderately strong.
After touching a mid-year high of 4034.08 points, the Shanghai Composite Index experienced a month of consolidation before ending the year with another impressive run of gains. As of the close on December 25th, the index rose 0.47% to 3959.62 points. Market-wide, over 3,700 stocks advanced, with commercial aerospace concept stocks leading a surge of limit-up gains and robotics concept stocks exploding higher. The market exhibited clear characteristics of value stocks setting the stage and multiple main themes rotating.
The total A-share trading turnover for the year has surpassed 407 trillion yuan, setting a new historical record, with 19 individual stocks each achieving a turnover exceeding one trillion yuan. This milestone figure not only signifies a marked increase in market trading activity but also reflects the gradually strengthening attractiveness of China's capital markets.
This strong year-end performance has fueled market anticipation for the traditional "spring rally." According to analysis in a Huaxi Securities report, several necessary conditions for launching a spring rally, such as valuation and liquidity, are gradually falling into place. China Merchants Securities also released a view stating that multiple signals indicate a classic "year-end to spring" trend is brewing and has slowly begun, primarily driven by expectations for fiscal stimulus in early 2026 and sustained increases in holdings by major institutional investors.
Despite rising optimism, the precise timing and intensity of the rally's start remain key market focus points. A retrospective study by Guosen Securities Co.,Ltd. shows that A-share spring rallies in recent years have exhibited clear front-running characteristics, with the highest probability of the main rising phase covering the period from the Spring Festival to the "Two Sessions." Historically, sectors such as non-ferrous metals, computers, and electronics have shown favorable odds. The report points out that, given conditions of not-weak corporate fundamentals, improving liquidity, and limited external shocks, this year's spring rally is highly likely to be reasonably strong and display characteristics of global stock market resonance.
Huaxi Securities notes that the launch of an A-share "spring rally" typically requires meeting three conditions: reasonable valuation levels, a loose liquidity environment, and catalysts that effectively boost risk appetite. Huaxi Securities believes these conditions are currently being gradually met.
Regarding valuation levels, the current price-to-earnings ratio of the CSI 300 Index is 14 times, sitting at the 76th percentile since 2010, which is below the historical median plus one standard deviation. The PE of the Wind All-A Index is 17.15, at the 66.1 percentile of its historical valuation range, indicating valuations are in a relatively reasonable interval.
In terms of the liquidity environment, overseas actions like the Fed's interest rate cuts and the Bank of Japan's rate hikes have materialized, alleviating market concerns about a reversal of carry trades. The tone set by the Central Economic Work Conference, calling for "continuing to implement a prudent and适度宽松的货币政策" (appropriately loose monetary policy), suggests there is still room for domestic reserve requirement ratio cuts and interest rate reductions.
On the policy catalyst front, the Central Economic Work Conference has already laid a positive foundation. As 2026 is the inaugural year of the 15th Five-Year Plan, incremental policies in areas like technological innovation, combating involution, and expanding domestic demand are expected to be continuously introduced.
China Merchants Securities points out that the market anticipates fiscal expenditure in 2026, as the first year of the "15th Five-Year Plan," is likely to be front-loaded, especially with central budget内投资 potentially accelerating its implementation, thereby pushing for a recovery in aggregate demand.
Regarding capital flows, a China Merchants Securities report indicates that continued increases in holdings of broad-based varieties like the CSI A500 ETF by major institutional investors are becoming a key driving force.
Since December, the A500 ETF has seen significant net subscriptions, with single-day subscription amounts reaching a record high of 7.1 billion yuan; the scale of funds flowing into A-shares through this product is estimated to exceed 400 billion yuan.
Furthermore, China Merchants Securities believes that the recent sustained strengthening of the offshore yuan exchange rate may reflect that some overseas funds have begun anticipating positive changes on the domestic policy front.
China Merchants Securities stated that the renewed large-scale net subscriptions into equity ETFs, with heavy volume in multiple broad-based ETFs, points to incremental funds tending to buy on dips. Subsequently, increased allocation by foreign capital driven by yuan appreciation and the influx of incremental insurance funds entering the market following the "good start" in premium income at the beginning of the year can be anticipated.
Regarding yuan appreciation, Huaxi Securities also believes this appreciation is often closely related to improved expectations for the domestic economy or anticipation of significant policy announcements, potentially reflecting that some overseas funds have started expecting positive changes in domestic policy.
Guosen Securities Co.,Ltd. analysis suggests that the rising market trend around the turn of the year is often driven by policy catalysts and has shown明显的抢跑 (clear front-running) characteristics in recent years. After 2017, only the spring rallies of 2019, 2024, and 2025 started after the New Year, whereas before 2017, only those of 2013 and 2015 commenced before the year-end. The current market is in the trading window most detached from fundamentals for the entire year.
From a win rate perspective, A-shares have a higher probability of gains during the period from the Spring Festival to the "Two Sessions," while H-shares show a higher win rate from New Year's Day to the Spring Festival, potentially playing catch-up after the "Two Sessions" conclude. Comparing the actual main rising periods across years, the probability is highest for the main rising phase to fully cover the period from the Spring Festival to the start of the "Two Sessions." Scenarios where there is overlap between the period from New Year's Day to the Spring Festival and the actual main upward wave account for 94%, making it more favorable for提前布局 (early positioning).
The report points out that strong rallies, such as those in 2012 and 2019, shared the common feature of宽松 (loose conditions) on the denominator side globally. Weaker rallies, like those in 2016, 2017, and 2022, often faced pressures on the分子端 (corporate fundamentals) or risk appetite dimensions. Under conditions where corporate fundamentals are not weak, liquidity is improving, and external shocks are minimal, the spring rally is highly likely to be reasonably strong.
From an average odds perspective, A-shares hold a slight advantage in the month and a half following the Spring Festival, but this advantage is primarily contributed by a minority of years集中 (concentrated). Hong Kong stocks are slightly stronger than A-shares in most years from New Year's Day to before the Spring Festival. The particularity of 2025, where Hong Kong stocks significantly outperformed A-shares, lay in the large-scale allocation to Hong Kong stocks by mainland residents' savings through the Stock Connect programs,叠加 (coupled with) the AI industry boom, and the regression of the AH premium.
Regarding sector patterns, based on average odds, Guosen Securities Co.,Ltd.'s review found that among primary sectors, non-ferrous metals, computers, social services, media, and electronics are relatively advantageous; among secondary sectors, minor metals, energy metals, digital media, electric machinery, and gaming performed better. Since 2010, telecommunications and defense military have led in terms of the probability of positive returns and the probability of outperforming the Wind All-A Index during the Spring Festival to "Two Sessions" period.
The report specifically notes that sectors with lower win rates during the Spring Festival to "Two Sessions" start phase generally see an improvement in their overall win rate between the post-"Two Sessions" period and "April 30th." However, the spring rally's指引效应 (guiding effect) on the year's main themes is relatively weak. Since 2010, the overlap rate between the top five sectors during the spring rally and the main themes of the previous year is 26.25%, and the overlap with the main themes of the current year is 27.5%, although this has increased somewhat after 2017.
Simultaneously, research by Guosen Securities Co.,Ltd. found significant resonance between global stock markets and China's spring rally. From a win rate perspective, France's CAC 40 and South Korea's KOSPI lead globally, with a win rate as high as 93.75%; the win rates for US stocks, the UK's FTSE 100, and Australia's S&P/ASX 200 are all stable at 87.5%.
Commodities overall exhibit a seasonal pattern of "high win rate,偏正 returns" in the first quarter. Gold averages a gain of about 4% in Q1, while silver, copper, and Brent crude also show relatively strong performance during the spring rally period. This resonance effect is primarily driven by the denominator side and is基本上正相关 (basically positively correlated) with the strength of easing signals released by central banks.
Comments