**Key Takeaways** This week, the market showed clear divergence, with a "weak Shanghai, strong Shenzhen" pattern, as most broad-based indices surged before retreating. Looking ahead, while heavyweight indices like the Shanghai Composite barely held above the 5-week moving average, they have yet to reclaim their previous upward trendlines. Meanwhile, the dominance of the computing power sector in attracting capital has exacerbated market fragmentation. We expect the market to remain range-bound amid weak heavyweight performance and sectoral divergence.
**Investment Strategy** Given the current "wait-and-see" market environment, investors should avoid chasing rallies or panic-selling, which could raise costs. Instead, adopt a phased approach by targeting key support levels (e.g., the Shanghai Composite’s September 4 low or gap-filling levels, the Hang Seng Tech Index’s recent lows or annual line, and the STAR 50’s prior lows). Sector-wise, focus on: 1. **Brokerages**: Undervalued with expanding market share. 2. **Home Appliances**: Historically strong December performers with smooth trends. 3. **Machinery/Equipment**: Boosted by recent positive catalysts. Stock picks should favor laggards in healthcare, consumer goods, and AI applications, as well as underperformers trading above annual lines.
**Weekly Market Recap (Dec 8–12, 2025)** 1. **Indices**: "Weak Shanghai, strong Shenzhen" trend; broad indices peaked then dipped. 2. **Sectors**: Computing/hard tech led gains; cyclical and consumer sectors lagged. 3. **Sentiment**: Shanghai/Shenzhen turnover rose; IC futures traded at a premium. 4. **Flows**: Margin debt edged up; nonferrous metals ETFs saw the highest inflows. 5. **Quant Data**: Major indices’ valuations ticked higher.
**Drivers** 1. China’s Central Economic Work Conference convened. 2. The PBOC added gold reserves for the 13th straight month. 3. November’s aggregate financing growth held steady. 4. The Fed cut rates by 25bps in December.
**Outlook** Post-rally pullbacks suggest continued range-bound movement. The Shanghai Composite, SSE 50, and CSI 300 hover near the 5-week MA but lack trend-reversal momentum. The ChiNext Index, having resisted adjustments earlier, may now follow the broader market downtrend, though standalone gains remain possible. In contrast, the STAR 50 and Hang Seng Tech, with healthier corrections, oscillate near range-lows with clear support. Brokerages’ rebound is tentative; further monitoring is warranted.
**Risks** Slower-than-expected domestic recovery; geopolitical uncertainties.
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