Chinese A-shares opened higher and climbed further on Monday, with the Shanghai Composite Index returning above the 4100-point level and breaking through its 10-day moving average. At the close, the Shanghai Composite was up 1.41% at 4123.09 points, while the STAR 50 Index rose 2.51%, the Shenzhen Component Index gained 2.17%, and the ChiNext Index advanced 2.98%.
With only four trading days remaining before the Spring Festival holiday, can the A-share market maintain its strong performance ahead of the break? Post-market interviews were conducted with ten public fund companies. Most pointed out that Monday’s tech sector rally was primarily driven by a combination of domestic and external catalysts. On one hand, strong gains in U.S. tech stocks on Friday lifted market sentiment; on the other, a high-level inspection of scientific and technological innovation efforts during the session further fueled optimism.
Several fund companies believe that short-term risk shocks have been largely digested. The underlying logic supporting the year-end rally—including a lull in fundamental data, improving policy expectations, and ample liquidity—remains intact, suggesting the market may be entering a new window for bullish positioning.
Liontrust Fund noted that investor confidence in A-shares continues to recover and warm up. Monday’s rally was attributed to two main factors: first, a high-level visit in Beijing focusing on technological innovation, which boosted enthusiasm for tech-related sectors. Culture media, communication equipment, internet services, minor metals, optoelectronics, semiconductors, and software development were among the top gainers. Second, there has been a notable improvement in overseas market liquidity.
Recent shifts in global risk appetite and liquidity have been significant. Beyond short-term fluctuations, two underlying trends are observable: first, a growing urgency in Europe and the U.S. to shift from virtual to real economy, with key minerals and supply chain security rising on the agenda; second, disruptive innovation driven by AI is breaking down traditional monopolies and high-return sectors, recently affecting the software industry most noticeably.
In contrast, China’s capital market has already undergone a repricing phase toward a more实体经济-focused orientation in recent years and is now in a stage of verifying and pricing quality and efficiency improvements, reducing the need for anxiety over near-term volatility.
At this stage, investor confidence in A-shares continues to recover, and the broader market remains in an environment where sentiment leans toward gains. Against this backdrop, attention may still be directed toward “resources + traditional manufacturing,” non-bank financials, the consumer chain, and the property sector. Within the consumer chain, duty-free, aviation, hotels, scenic spots, and freshly made tea beverages may be worth watching; in the property chain, high-quality developers and building materials could be in focus.
Penghua Fund expressed optimism toward a three-dimensional allocation strategy covering “consumption + technology + cyclicals.” A-shares rose on Monday amid multiple positive catalysts both domestically and internationally. Externally, the Dow Jones Industrial Average broke through the 50,000 mark, and tech stocks like Nvidia surged, significantly boosting global risk appetite. Domestically, a national leader’s inspection of tech innovation spurred activity in AI application and other tech sectors; the State Council’s executive meeting studied measures to promote effective investment, and the Ministry of Industry and Information Technology pushed forward with “national computing power interconnection node construction,” injecting confidence into strategic emerging industries. Additionally, the central bank’s continued gold reserve accumulation helped stabilize market expectations.
Looking ahead, a three-pronged strategy focusing on consumption, technology, and cyclicals is favored. Over the medium term, the consumption sector is seen as a main theme, supported by the Spring Festival peak season and policy incentives such as holiday shopping promotions. Sub-sectors like travel and food and beverage are expected to lead a “spring rally.”
China Universal Asset Management indicated that the peak phase of sentiment-driven shocks is passing. Recent adjustments in global risk assets stemmed more from sentiment than fundamental or policy changes. The core logic supporting the year-end rally in China—improving fundamentals, strong policy support early in the year, and loose liquidity—remains solid.
Previous corrections have released certain risks, and the worst of the sentiment shock appears to be over. Global risk assets are gradually stabilizing, while sentiment indicators for A-shares and Hong Kong stocks suggest the market has entered a zone with attractive valuations.
Looking forward, as Sino-U.S. macroeconomic data are released and industry-specific catalysts arrive intensively, coupled with a post-holiday rebound in risk appetite and the calendar effect of incremental fund inflows, the market environment is expected to turn more positive.
Allocations may gradually shift toward positioning for the Spring Festival rally, focusing on three themes: first, AI hardware within TMT influenced by overseas trends (North American computing chains, semiconductor supply chains); second, new energy (battery storage, power grids, photovoltaics) and innovative drugs in advanced manufacturing; third, sectors driven by domestic logic such as price increases (chemicals, building materials, steel). In terms of industry themes, AI applications (computers, media, humanoid robots) warrant increased attention in February due to dense catalysts and reasonable crowding.
China Merchants Fund stated that the market is likely to enter a new window for bullish activity. Short-term risk shocks have been largely released, and the foundational drivers of the year-end rally—including a quiet period for fundamentals, favorable policy expectations, and abundant liquidity—remain in place. The market is expected to see a renewed phase of bullish positioning, with a focus on thematic growth areas supported by industry catalysts.
Going forward, some assets that have risen significantly since the start of the year may be prone to pullbacks. In terms of allocation, key directions include: semiconductors and advanced manufacturing; new energy; internet platforms and growth stocks, which are more sensitive to changes in risk appetite and may show greater elasticity if overseas rate expectations ease; and high-dividend, state-owned enterprises and other defensive assets that can serve as stabilizers during volatility.
Bosera Funds observed a shift in structural direction in the pre-holiday market. Domestically, equity markets showed clear differentiation. Ahead of the holiday, investors tend to favor sectors with relatively stable performance and less sensitivity to economic cycles during periods of macroeconomic data silence or increased external uncertainty. The pre-holiday market driver may transition from broad expectations of loose liquidity to a search for structural opportunities with earnings certainty and policy support.
Fullgoal Fund reiterated strong long-term optimism toward the AI industry. AI sector valuations remain reasonable, and the supply chain exhibits a “narrowing circle” characteristic. Overseas clients’ high demands for quality and stability, coupled with rapid technological iteration, create solid barriers. As AI applications continue to roll out overseas, computing power demand is growing exponentially, and the long-term prospects for computing infrastructure—from training to inference, text to video—remain broad.
Additionally, the ability of companies to expand overseas increasingly impacts their earnings flexibility. Firms that can integrate into global industrial chains, particularly overseas computing power chains, are likely to sustain growth momentum.
Morgan Stanley Huaxin Fund suggested that technology may be the optimal strategy in the near term. Recent market patterns have seen weighty stocks like financials under continued pressure, resource products experiencing high volatility, and tech stocks affected by consecutive overseas declines. Domestic demand sectors have served as safe havens and achieved excess returns over the past two weeks.
A rotational pattern is expected to continue, driven mainly by expectations, as most sectors lack sufficient earnings validation. In the short term, technology—especially overseas computing power themes—is seen as a favorable strategy, likely boosting AI-related activity. At the same time, net selling of broad-based index ETFs has largely ended, making oversold heavyweight sectors worth watching.
E Fund Management believes the market may regain momentum amid fluctuations. Since the start of the year, broad-based ETFs saw large redemptions after a rapid market rise, and recent sharp fluctuations in precious metals impacted sentiment and liquidity, affecting index performance. Structurally, rotation from tech growth to domestic demand consumption occurred. As index gains slowed or even turned negative, selling pressure in broad-based ETFs has noticeably eased. Once risk appetite stabilizes, these could again provide incremental fund support, allowing the market to rebuild strength through volatility.
From a mid-term quarterly perspective, given domestic liquidity ease, seasonal effects, and potential new catalysts for AI applications and commercial aerospace around the Spring Festival, tech growth is expected to lead seasonal market trends. AI applications and commercial aerospace may achieve new breakthroughs, and after a pause in the non-ferrous metals rally, attention may turn to memory, new energy, and chemicals.
HFT Investment Management noted that early positioning for the “spring rally” is underway, suggesting consideration of buying on dips. Year-end positioning for the spring rally has gradually lifted the market bottom. In early January, the Shanghai Composite broke above its high since September 24, 2024, improving market sentiment.
Allocation ideas include: first, a tech focus covering semiconductors, computing power, gaming, and robotics, as high-quality development and new productive forces remain policy priorities, particularly in areas where domestic technology is making breakthroughs; second, sectors tied to external demand, such as chemicals, non-ferrous metals, and machinery. Although Sino-U.S. trade tensions persist, the most difficult period may be over, and Chinese companies expanding overseas remains a medium-term narrative.
Xinyuan Asset Management indicated that the market is entering the latter half of a high-volatility deleveraging phase. Currently, a global risk-off phase is being driven by high volatility in precious metals, which has locked up or eliminated some liquidity.
In the short term, global asset allocation traders need to rebalance risk preferences across risk assets including U.S. stocks and commodities, making it necessary to reduce risk exposure and position sizing.
The market is in the second half of a high-volatility deleveraging process. Based on A-share price action, an initial rebound is likely early in the week, followed by a potential secondary dip.
Silver has found an initial bottom near $64/oz, which may help reduce volatility in precious metals. After hitting a high on February 4, A-shares have also begun a volatility reduction process, which may complete early this week, entering a “Spring Festival red envelope” period.
For sector selection, elastic trading directions like AI applications, semiconductors, and commercial aerospace are suggested. In terms of industry allocation, building materials, petroleum and petrochemicals, communications, defense and military, and computers are worth attention; caution is advised toward conglomerates, automobiles, pharmaceuticals, power equipment and new energy, and consumer services.
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