On January 5th, A-shares enjoyed a strong post-holiday start, with the Shanghai Composite Index reclaiming the 4000-point level after 34 trading days and marking a rare 12-day consecutive gain. At the close, the Shanghai Composite Index rose 1.38%, the Shenzhen Component Index gained 2.24%, the ChiNext Index advanced 2.85%, and the STAR 50 Index surged over 4%. Market analysis attributes this performance to multiple positive catalysts for A-shares: 1) The robust performance of Chinese assets like the Renminbi, Hong Kong stocks, and U.S.-listed Chinese stocks during the holiday period has injected confidence into the post-holiday trajectory of A-shares. 2) The semiconductor sector received multiple boosts: the National Integrated Circuit Industry Investment Fund significantly increased its stake in SMIC, China's chip industry saw consolidation and upgrades, and TSMC received an annual license from the U.S. government. 3) According to the Securities Times, guidelines for improving the long-cycle assessment of annuity funds have been issued, and related work is progressing. Huajin Securities pointed out that reviewing market data since 2010, the performance of Hong Kong stocks during the New Year holiday correlates with the subsequent post-holiday movement of A-shares, with a correlation coefficient of approximately 0.5. This historical pattern has become one of the key reference points for forecasting post-holiday market trends. On the market front, the insurance sector strengthened, with New China Life Insurance and China Pacific Insurance both hitting new historical highs. Brain-computer interface concept stocks erupted across the board, igniting pharmaceutical stocks, with Innovation Medical and over 20 other stocks hitting the daily limit-up. The chip and semiconductor industry chain surged, with Dongwei Semiconductor and many others rising by the limit-up or over 10%. AI application areas like short-form drama games and education surged in the afternoon session, with BlueFocus Communication hitting a new 10-year high. The commercial aerospace concept remained hot, with China Satellite Communications marking three limit-ups in five days, and Goldwind Technology among others hitting the limit-up. Additionally, sectors including defense, oil and gas, lithium batteries, robotics, and gaming all showed intraday strength. On the decline, the Hainan Free Trade Port concept weakened, with Hainan Development falling by the limit-down. Furthermore, port shipping, tourism, and banking sectors led the losses. Looking ahead, China Securities (CSC) believes the "year-end transition rally" is likely to continue unfolding in January. Sector focus is expected to revolve around semiconductors, AI, and future industry hotspots. The brain-computer interface concept exploded, triggering a wave of limit-up gains and igniting pharmaceutical stocks. Over 20 stocks, including Innovation Medical, Meihao Medical, Sanbo Brain Science, Aipeng Medical, Chengyitong, and Xiangyu Medical, hit the daily limit-up. Commentary: The catalyst stems from Elon Musk's recent social media statement that his brain-computer interface company, Neuralink, will begin "mass production" of brain-computer interface devices in 2026. Caixin Securities believes that the brain-computer interface industry, as a high-growth track integrating cutting-edge multi-disciplinary technologies, is entering a critical phase of scaled application, driven by strong policy support, implementation of medical insurance payments, and continuous technological breakthroughs. The chip industry chain surged significantly, with strong performances seen across equipment, materials, wafer fabrication, and memory chips. Stocks like Dongwei Semiconductor and Gigadevice hit the daily limit-up. Commentary: The semiconductor sector is buoyed by multiple tailwinds: first, the National Integrated Circuit Industry Investment Fund nearly doubled its stake in SMIC's H-shares from 4.79% to 9.25%; second, China's chip industry is consolidating and upgrading, evidenced by Huahong's acquisition of a 97.5% stake in Huali and AMEC's strategic merger with Zhonggui Hangzhou; third, TSMC received an annual license from the U.S. government; fourth, Nvidia and AMD plan to "significantly increase GPU prices in phases." A Guojin Securities research report stated that the global semiconductor industry is currently entering a strong recovery cycle. The insurance sector strengthened with volatility. New China Life Insurance rose over 7%, and China Pacific Insurance gained over 6%, both setting new historical highs, while Ping An Insurance, China Life Insurance, and PICC Group also followed with gains. Commentary: The positive sentiment follows recent data from the National Financial Regulatory Administration showing that in the first 11 months of 2025, the insurance industry achieved total premium income of 5.7629 trillion yuan, a year-on-year increase of 7.6%. A China Securities (CSC) research report recommends paying attention to the potential for a "double play" of earnings growth and valuation recovery in the insurance sector. AI application areas, including short-form drama games and education, experienced an afternoon surge. BlueFocus Communication rose over 10%, hitting a new 10-year high, while Fengyuzhu, Bora Hi-Tech, Kede Education, and Kunlun Tech also followed with gains. Commentary: The catalyst is Meta's announcement of its acquisition of AI agent company Manus to accelerate artificial intelligence innovation. Post-merger, the Butterfly Effect will continue to operate independently at the company, team, and product levels, while also undergoing deep integration with Meta's core global consumer products. China Securities (CSC) believes the "year-end transition rally" is likely to continue unfolding in January. A-shares' year-end rally has commenced as expected. The liquidity environment and exchange rate environment facing the market this New Year are significantly better than the previous two years. Multiple positive factors have driven a strong rally in Hong Kong stocks, suggesting A-shares are poised for a positive start. Sector focus is expected to revolve around semiconductors, AI, and future industry hotspots. Key sectors to watch include: Semiconductors, AI, Non-bank Financials, New Energy, and Machinery Equipment. Long-term favorites include: Non-ferrous metals (industrial metals, minor metals), Innovative Drugs, etc. Key thematic focuses include: Commercial Aerospace, Nuclear Power, Humanoid Robots, and Hainan (Duty-Free). China Galaxy Securities believes that the strong performance of the Hong Kong stock market and the Renminbi exchange rate during the holiday period will help boost investor confidence, and the A-share market may continue its structural行情. The pace of further gains will depend on observing policy expectations and breakthroughs in industrial trends. Supported by these factors, the "Spring躁动" rally might start earlier than usual. However, short-term disruptions from uncertainties such as overseas geopolitical risks still require attention. Looking ahead to 2026, the start of the "15th Five-Year Plan" period is expected to strengthen reform policy expectations. Factors like an appreciating Renminbi support favorable liquidity conditions, potentially boosting market confidence. Focus should be on technology leaders with proven earnings delivery capabilities under the logic of profit recovery, and cyclical sectors benefiting from expectations of rising price levels. Huaan Securities believes that with macroeconomic policies providing continuous support, a significant improvement in the construction PMI suggests an anticipated stabilization and recovery in investment. The increased possibility of a reserve requirement ratio cut, currency appreciation, and supportive mutual fund allocations are nurturing micro-liquidity. With positive factors accumulating at the start of the year, a spring rally is expected to gradually unfold. Regarding allocation, priority should be given to sectors with high elasticity, seeking directions that "have a story" and "have earnings." Specifically, the AI industry chain remains the strongest main theme, and an acceleration in the growth style's rise alongside new highs across various growth industries is anticipated. Sectors with solid fundamentals and popular themes, such as memory, the energy storage chain, defense, and machinery equipment, also warrant attention.
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