China's A-share market opened higher across the board, with the Shanghai Composite Index up 0.04% and the ChiNext Index rising 0.14%. Leading the gains were sectors such as Hainan Free Trade, precious metals, and solar energy, while controlled nuclear fusion, autonomous driving, and optical communication sectors lagged behind.
**Institutional Views on Market Outlook**
**SDIC Securities**: The year-end rally remains under cautious evaluation, with overseas expansion and low-valuation cyclical sectors likely to outperform in the first half of next year. SDIC Securities noted that since Q4, their outlook on the broader market index has remained largely unchanged. The liquidity-driven bull market gradually faded after the index surpassed 4,000 points. For the index to sustain gains above this level, a transition from liquidity-driven to fundamentals-driven growth is necessary. Until fundamentals improve, the market is expected to remain in a high-volatility range.
Regarding the year-end rally (December to January), SDIC Securities observed that most core A-share indices now trade at PE valuations above the 70th percentile over the past decade. However, global liquidity fluctuations in December and the absence of further domestic monetary easing have constrained expectations for a strong year-end rally. Strategically, investors should remain patient, while tactically focusing on identifying key trends. In H1 2024, synchronized economic recovery between China and the U.S. may favor sectors like overseas expansion and undervalued cyclicals (including globally priced commodities, non-ferrous metals, chemicals, industrial metals, machinery, home appliances, and power equipment).
**Huaxi Securities**: Positive factors for the "Spring Rallies" are accumulating, with incremental capital seeking bargain opportunities in growth and anti-fragmentation sectors. Historically, A-share "Spring Rallies" require reasonable valuations, ample liquidity, and catalysts such as policy support or external risk easing. Currently, the Fed’s rate cuts and the Bank of Japan’s rate hikes have alleviated carry-trade reversal concerns. Expectations include foreign capital inflows driven by RMB appreciation and increased insurance fund allocations due to strong premium growth early in the year. Recent large-scale net inflows into equity ETFs and rising trading volumes in broad-based ETFs suggest incremental capital is positioning for a rebound.
Sector recommendations: 1. Growth sectors benefiting from industrial policies (e.g., import substitution, robotics, aerospace, biotech, energy storage). 2. Cyclical sectors supported by "anti-fragmentation" policies (e.g., chemicals, energy metals, resources). 3. Consumer sectors that may see short-term catalysts from stimulus policies.
**Zhongtai Securities**: The most significant rally in H1 2024 is likely before the Lunar New Year, with potential outperformance in brokerage and tech sectors. Zhongtai Securities highlighted that the upcoming Fed chair nomination could reinforce global easing expectations. Additionally, year-end institutional profit-taking may reverse in early 2024, boosting market liquidity and activity. With the Lunar New Year falling late and coinciding with the "Two Sessions," pre-holiday speculation on consumption and fiscal stimulus could drive short-term momentum.
Micro-level catalysts, such as consolidation expectations in brokerages (e.g., CICC’s relisting) and major IPOs (e.g., Unitree Tech), may spur rallies in non-bank financials and tech sectors. The market is nearing a bottom, presenting an optimal window to position for the pre-holiday rally. Key themes include robotics, nuclear power, commercial aerospace, and non-bank financials. Consumer sectors may offer tactical opportunities, particularly in services (sports, tourism) and healthcare (medical devices benefiting from aging trends).
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