Since the beginning of 2026, the A-share market has welcomed multiple positive signals. Guotai Haitong Securities released a research report suggesting that a resonance of improving policy expectations, liquidity, and fundamentals positions the A-share market for a spring "good start." Amidst signals of price increases, industrial prosperity is initiating and continuing. The focus of the optimistic market outlook lies in technology, non-bank finance, and consumption.
The logic behind the spring rally is supported by three key factors. Expectations for looser overseas liquidity are heating up. With the mystery of the next Federal Reserve Chair about to be solved, the market is beginning to anticipate U.S. interest rate cut prospects in 2026. This easing of overseas liquidity, combined with pre-Spring Festival foreign exchange settlements, is expected to promote Renminbi stability and appreciation, providing a favorable external environment for the A-share market.
Incremental funds continue to pour into the market. The sustained inflow of incremental funds, represented by products like the A500 ETF, coupled with the allocation demand from insurance capital's "good start," further solidifies the liquidity foundation. Since December, the net inflow into the CSI A500 ETF has exceeded 96 billion yuan, while the reduction in risk factors for stock investments by insurers has unleashed hundreds of billions in incremental funds, providing continuous momentum for the market.
Policy expectations continue to strengthen. Decision-makers have, for the first time, proposed "promoting investment to stop falling and stabilize," while Qiu Shi has emphasized "improving and stabilizing expectations for the real estate market." The intensity of "counter-cyclical and cross-cyclical adjustments" is expected to increase. Accelerating economic transformation, declining risk-free returns, and capital market reforms solidify the intrinsic trend of China's "transformation bull market."
Price increase signals offer new clues for the initiation and continuation of prosperity. The central bank's fourth-quarter regular meeting highlighted "promoting stable economic growth and a reasonable recovery in prices," underscoring the growing importance of price signals. Since the second half of 2025, with the advancement of domestic anti-involution policies and a loose global environment characterized by a weak US dollar, the logic of price increases has gradually begun to unfold in certain sectors.
Specifically, three major areas warrant attention: first, the chemical sector, where demand is improving but supply is contracting, such as organic silicon, refrigerants, pesticides, bromine, and PTA, as well as new energy areas like lithium carbonate, lithium hexafluorophosphate, and polysilicon; second, the TMT supply chain, where rapidly expanding demand is causing short-term supply shortages, such as memory chips, copper-clad laminates, and electronic glass fabric; third, the non-ferrous metals sector, where both financial and demand attributes are enhancing, including precious metals, industrial metals, and minor metals.
For sector allocation, three main themes present opportunities. The technology and growth theme is prominent. Global breakthroughs in chip technology and the continuing trend of memory price hikes, coupled with domestic shortages in computing infrastructure and an accelerated push for localization, alongside the non-linear growth in token consumption by leading manufacturers, are key drivers. Recommendations include Hong Kong-listed internet stocks, electronics, media, and computers, as well as globally competitive manufacturing companies expanding overseas, such as those in power equipment and machinery equipment.
The non-bank financial theme is another focus. Benefiting from the shift of household deposits and growing wealth management demand, and boosted by capital market reforms improving risk appetite, the insurance and brokerage sectors are recommended.
The pro-cyclical theme also offers value. With valuations and positioning at low levels and marginal improvements at the cyclical bottom, sectors benefiting from policies aimed at expanding domestic demand and stabilizing the property market are favored. These include tourism services, hotels, and mass-market consumer goods. Within the cyclical sphere, preference is for commodities with tight supply-demand dynamics and rising prices, such as non-ferrous metals and chemicals.
Theme-based investment opportunities are also emerging. AI applications and robotics are facing a period of intensive catalysts, while commercial aerospace maintains high热度. Opportunities are seen in themes like AI applications, robotics, commercial aerospace, and domestic consumption.
Investors should remain aware of risks, including those related to the overseas economy and geopolitics, as well as the risk of individual companies underperforming earnings expectations.
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