Recently, both the A-share and Hong Kong stock markets have rebounded significantly, continuing the upward trend from last week, as year-end market activity gradually unfolds, dispelling the gloom of previous adjustments. Earlier, due to profit-taking pressure on the previously high-performing tech sector, many strong stocks experienced pullbacks, leading some investors to grow pessimistic about the market outlook. At that time, I pointed out that this adjustment might not signal the end of the rally but rather the beginning of a new upward cycle. The intensified divergence between bulls and bears around the 4,000-point mark is a normal phenomenon, indicating that the market trend is far from over, and the current retracement is merely a healthy correction.
Looking ahead to December, on one hand, tech stocks that have seen substantial gains may continue to face profit-taking pressure as some investors opt to lock in profits. On the other hand, investors who missed earlier opportunities may use this adjustment phase to actively position themselves for the 2026 market. Given that 2026 is expected to remain within a tech-driven bull cycle, the tech sector is not only the core driver of the 2025 market but also nearly the sole dominant theme. In 2026, more sector rotations are anticipated, creating broader profit opportunities, with tech stocks still warranting close attention and likely remaining a key theme for next year's market.
The current bull market trend is already well-established and is not a short-lived, rapid rally destined for an early peak. The strength of tech stocks is driven by multiple factors: the "15th Five-Year Plan" proposal has been officially approved, with its key focus areas centered on technological innovation, including embodied intelligence, humanoid robots, semiconductors, computing power and algorithms, low-altitude economy, solid-state batteries, biopharmaceuticals, and deep-sea equipment. These sectors have already performed strongly this year and are expected to continue leading gains next year, generating significant profit effects and further deepening the bull market. This year, the market has humorously dubbed tech stocks as "small-cap growth stocks," traditional sectors as "old-cap stocks," and those in between as "mid-cap stocks." This bull market is underpinned by solid logic and is not devoid of fundamental support. In reality, traditional industries generally face slowing growth and operational pressures, while the new economy sectors remain vibrant, particularly those highlighted in the "15th Five-Year Plan," which are attracting substantial capital inflows and exhibiting robust growth.
Recently, Joseph Tsai, Chairman of Alibaba Group, noted in an interview that while AI may appear somewhat frothy from a stock price perspective, its practical applications are real and far from being a bubble. The current tech revolution is essentially an AI revolution, with artificial intelligence already significantly enhancing productivity across numerous industries. As AI applications continue to expand, they will create even greater value in the future, making it imperative for investors to pay close attention to AI. Moreover, while U.S. tech stocks have enjoyed over a decade of continuous gains, the rally in A-share and Hong Kong-listed tech stocks has only lasted slightly over a year. In terms of total market capitalization, the gap between A-share/Hong Kong tech stocks and their U.S. counterparts remains more than tenfold. Thus, while certain segments may appear overvalued, the overall market does not yet exhibit clear bubble characteristics. In 2026, the tech-driven bull market is expected to persist. The sequence of this bull market is likely to unfold as follows: initial leadership by "small-cap growth stocks," followed by gradual strength in "mid-cap stocks," and finally rotation into "old-cap stocks." The first nine months of 2025 largely featured tech stocks as the sole standout, but since September, sectors like energy storage, defense, non-ferrous metals, and power equipment—classified as "mid-cap stocks"—have begun to show strength. By November, traditional blue-chip stocks also staged a temporary rebound amid the tech sector's adjustment. In 2026, the market is expected to deepen further, with multiple sectors likely to take turns leading the charge. Investors may consider adopting a balanced allocation strategy to capitalize on structural opportunities.
From a medium- to long-term perspective, technological innovation remains the core direction of economic transformation. Meanwhile, traditional white-chip stocks, with their brand value and stable profitability, can provide shareholders with consistent dividends, making them equally worthy of allocation. Adhering to value investing principles means seizing growth opportunities brought by technological innovation while also paying attention to undervalued, high-dividend sectors and traditional high-quality enterprises with brand advantages. This rotational pattern may become a defining feature of this bull market. Investors are advised to focus on leading companies in tech, new energy, and consumer sectors to effectively capture opportunities in this bull market. This bull market is expected to last considerably longer rather than ending abruptly. For most investors, a slow and steady bull market is more manageable, enhancing investment returns and genuinely increasing household wealth, thereby stimulating consumption and economic recovery, injecting momentum into the broader economic rebound. It can be said that a stable, prolonged bull market may serve as an effective means to boost consumption growth and a critical path to breaking the current economic impasse. I regard this bull market as the "fourth engine" driving economic growth, a view increasingly shared by market participants. Maintaining confidence and patience while allocating to high-quality individual stocks or funds is the optimal strategy to navigate this slow and steady bull market. The scale of this bull market may present a once-in-a-decade investment opportunity, and investors should actively position themselves to capitalize on it.
(The author is the Chief Economist and Fund Manager at Qianhai Kaiyuan Fund.)
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