The A-share market experienced volatile gains this week. Influenced by a rise in market risk appetite, the A-share market saw an upward trend this week. Driven by improved market sentiment and heightened risk appetite, the Shanghai Composite Index rose, while the performance of major broad-based indices was mixed. Among the primary broad indices, the CSI 500 performed the best with a gain of 4.3%, whereas the SSE 50 was the worst performer, declining by 1.5%. The current valuation of the Wind All Share Index is at the 95.2nd percentile since 2010. Sector-wise, building materials, petroleum & petrochemicals, and steel showed relatively strong performance. Key events unfolded this week. On the economic data front, domestic Q4 GDP figures and December's total retail sales of consumer goods, among other economic indicators, were released. The year-on-year GDP growth rate for the fourth quarter of 2025 was 4.5%, bringing the full-year cumulative growth to 5.0%. December's total retail sales grew by 0.9% year-on-year, falling short of the expected 1.5% and November's 1.3%. The cumulative year-on-year growth rate for fixed-asset investment from January to December was -3.8%, lower than the Wind consensus expectation of -2.4% and also below the cumulative growth rate of -2.6% for January to November. In December 2025, the year-on-year declines in both narrow and broad infrastructure investment further widened. In the industrial sector, Jensen Huang stated that the AI field requires more investment, and nine government departments jointly issued the "Opinions on Promoting the High-Quality Development of the Drug Retail Industry." On January 21, Jensen Huang pointed out at the World Economic Forum Annual Meeting in Davos that AI development necessitates "the largest infrastructure construction in human history," requiring trillions of dollars in new investment. Separately, nine departments jointly issued the aforementioned opinions. On the international front, the IMF raised its economic growth forecast for China, and tensions surrounding the Greenland incident showed signs of easing. On January 19, 2026, the International Monetary Fund (IMF) released an update to its World Economic Outlook report, raising its 2025 economic growth forecast for China by 0.2 percentage points to 5%, while also increasing its 2026 growth expectation. U.S. President Trump announced that a framework agreement on the Greenland issue had been reached with NATO Secretary-General Rutte. Maintain stability and hold stocks through the holiday. Adopt a steady approach and hold positions over the Spring Festival. Referring to previous market trends, we believe the market will remain volatile before the holiday, struggling to maintain a stable trend, primarily due to a decline in investor trading enthusiasm and a short-term tightening of micro-liquidity ahead of the festival. Historically, the probability of major indices rising in the 20 trading days before the Spring Festival is less than 50%. The market is expected to gain fresh upward momentum after the holiday, as both the probability of gains and the average increase for major indices in the 20 trading days post-holiday are relatively high. Therefore, we advise investors to prioritize stability in the near term but still maintain stock holdings over the holiday period. Regarding sectors, focus on electronics, power equipment, and non-ferrous metals, among others. If the market style in January is growth-oriented, the top-ranked sectors based on our five-dimensional industry comparison framework are electronics, power equipment, communications, non-ferrous metals, automobiles, and defense. If the market style in January is defensive, the top-ranked sectors are non-bank finance, electronics, non-ferrous metals, power equipment, automobiles, and transportation. Under both style assumptions, there is some similarity among the top-scoring industries. In terms of themes, continued attention can be paid to commercial aerospace. After experiencing volatile adjustments last week, the commercial aerospace sector saw its decline gradually slow at the start of this week, followed by a significant broad-based rebound in the latter half, stimulated by positive news. Several companies hit their daily upside limit on Friday. From a short-to-medium-term perspective, we believe the probability of the sector as a whole significantly expanding its upward space again is relatively low, given the substantial gains accumulated previously. However, certain niche segments, such as space computing power and upstream materials, are expected to maintain some activity. From a medium-to-long-term perspective, favorable industry policies continue to be implemented, and the sector's development prospects are vast. If the sector experiences a阶段性回调 during its consolidation phase, it could still present a good opportunity for investors to buy on dips. Risk analysis: Overseas risk disruptions exceed expectations; historical patterns fail to hold; a significant decline in market sentiment.
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