The year-on-year improvement in the December PMI for 2025 exceeded seasonal norms, reinforcing a scenario with no significant downside risks for the spring season. The December PMI, production, new orders, and new export orders for 2025 all showed significantly better sequential changes than typical seasonal patterns. This is directly related to the later timing of the Spring Festival in 2026, which has pulled forward export orders. During the pre-Spring Festival window, these factors will continue to support the validation of positive economic data. With economic downside risks set aside, a window characterized by no major downside risks and the anticipation of favorable factors has opened. We continue to highlight the consecutive time windows supporting risk appetite in the spring: the pre-Spring Festival rebound in February is one of the calendar features with the highest win rate for A-shares, and it is also a window where significant catalysts in the technology sector may materialize. The Two Sessions in March may deliberate the final version of the 15th Five-Year Plan, potentially offering richer policy catalysts. A potential visit by Trump to China in April would mark a period of confirmed easing in Sino-US trade relations and is also a key window for stabilizing capital market expectations. After the Shanghai Composite Index's consecutive gains, the spring rally still has room to extend. Economic and industrial factors are slow-moving variables, while capital supply and demand are fast-moving variables, a characteristic that may become more pronounced during the spring rally. The surge in China Securities A500 ETFs seen at the end of 2025 has entered a stabilization phase. Incremental funds at the start of the year may come from the insurance sector's strong start-of-year sales, combined with a rebound in foreign activity driven by Renminbi appreciation at the beginning of the year. The year-end and beginning-of-year period is not short of incremental funds, a strong start for A-shares is anticipated, and the wealth effect is likely to spread broadly. Sector rotation and active thematic characteristics are expected to continue. The conditions for a comprehensive bull market in 2026 will gradually fall into place; this is a dynamically evolving process. The market is reluctant to prematurely price in optimistic expectations for some bull market conditions, but facts will naturally validate them. For instance, there was previously significant divergence in the market regarding the conditions for foreign capital inflows. While foreign investors focus on China's economy and real estate sector, the trigger for their return may not necessarily be a broad-based economic improvement or a fundamental resolution of property market issues. In the short term, the Renminbi's significant appreciation has strengthened the perception of Chinese manufacturing competitiveness, which may trigger an accelerated return of foreign capital. 2026 is a year where supply rationalization in midstream manufacturing is likely to lead to improved supply-demand dynamics; a year where the accumulated wealth effect in the stock market may reach a tipping point, potentially driving a shift in household asset allocation towards equities; and also a year where China's manufacturing competitive advantages could be readily confirmed and this perception could spread continuously among both domestic and foreign investors. The self-validation of conditions for a comprehensive bull market in 2026 may be an ongoing process. The "Two-Stage Bull Market" thesis remains unchanged: Bull Market 1.0 in 2025 (a structural bull market in tech) has temporarily entered a high-altitude zone and is currently in a phase of quarterly-level high volatility. Attention should subsequently be paid to the possibility of a correction that triggers "doubts about the bull market's level." Bull Market 2.0 is anticipated in the second half of 2026. This would be a comprehensive bull market driven by the resonance of multiple positive factors: cyclical improvement in fundamentals, a new phase in tech industry trends, a shift in household asset allocation towards equities, and the increasing visibility of China's influence. The structural outlook for spring remains unchanged: thematic plays offer higher elasticity, with opportunities in the AI computing chain and pro-cyclical sectors primarily based on Alpha logic. Spring thematic rotation includes: industrial themes (commercial aerospace, robotics, nuclear fusion), capital flow themes (shifting from A500 ETFs to strong insurance sales and foreign capital inflows, corresponding to a recovery in high-dividend stocks and core assets), and policy themes (service consumption, Hainan). The expectation of a mid-term bull market itself is also a thematic thread (insurance, brokers). The main battlegrounds for style investing (AI computing chain and pro-cyclical sectors) also present opportunities. These areas attract high institutional attention, but their weighting in the spring rally might be relatively lower. Focus on opportunities with strong Alpha logic within these areas. Following the price increase driven by its Alpha logic, optical connectivity is likely to experience high volatility. Other segments of the AI industry chain have yet to break out of their previous high volatility ranges. Within pro-cyclicals, only basic chemicals and industrial metals with Alpha logic are recommended; the pro-cyclical Beta in spring may only offer a technical rebound from oversold levels. The view on style rhythm after spring remains unchanged: Q2 2026 is expected to be a bottom-building phase. Sectors within technology and advanced manufacturing that have fundamental Alpha logic may lead the next bull market. The comprehensive bull market in the second half of 2026 will likely be initiated by pro-cyclical assets, but technology and advanced manufacturing are ultimately expected to dominate the bull run. Risk提示: Overseas economic downturn exceeds expectations; domestic economic recovery falls short of expectations.
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