The market experienced wide fluctuations today, with the three major indices collectively closing lower. AI application stocks continued their adjustment, while commercial aerospace saw a return of capital inflows. Sectors like semiconductors and power equipment remained strong throughout the session. The full-day market turnover reached approximately 3 trillion yuan, an increase of over 100 billion yuan compared to the previous trading day. Nearly 3000 stocks declined across the two exchanges. Notably, broad-based ETFs saw sustained heavy volume in the afternoon session. Among them, ChinaAMC SSE 50 ETF (510330) experienced a significant volume-driven decline during afternoon trading, with turnover exceeding 22 billion yuan, setting a record high for its historical turnover. Harvest CSI 300 ETF (159919) saw turnover nearing 10 billion yuan, while Fullgoal CSI 1000 ETF (159629) witnessed a turnover that surged more than tenfold compared to yesterday. The market's weakness today may be attributed to shifting expectations. First, the deceleration in M1 growth for December has raised concerns, as the traditional A-shares strategy of "using M1 to guide trading decisions" suggests lingering worries about ineffective liquidity transmission. Second, following yesterday's structural "rate cut," market sentiment was initially buoyant. However, some brokerages now believe that the increase in volume accompanying the structural tool rate cut reduces the likelihood of a broader interest rate cut before the Spring Festival. Third, as sentiment cools in sectors like commercial aerospace and AI applications, investor expectations for the market's profitability effect have also changed.
On the market front, State Grid's forecast that fixed asset investment during the "16th Five-Year Plan" period will reach 4 trillion yuan, a 40% increase compared to "14th Five-Year Plan" investment, spurred strength in power grid equipment and utility stocks. Companies like Sieyuan Electric and Guangdian Electric hit the upside limit. The semiconductor and chip industry chain rallied strongly across the board, with Kangqiang Electron and Shenghui Integration sealing limit-up boards. Jiangbolong surged over 10%, hitting a new intraday historical high. The robotics industry chain also advanced, led by Rifeng and Henggong Precision. The commercial aerospace concept saw a volatile recovery, with Chengjian Development reversing previous losses to hit the limit-up. Additionally, consumer electronics and photovoltaic equipment sectors showed intraday strength. On the downside, AI application stocks continued their correction, with component stocks like Xinhuanet and Zhewen Interconnection experiencing widespread limit-down declines. Oil and gas stocks adjusted amidst fluctuations. The lithium battery sector, tourism & hotels, and diversified financials were among the top decliners.
Looking ahead, Orient Securities stated that from a short-term perspective, the Spring Festival rally is not yet over, and the slow bull market continues. They anticipate the Shanghai Composite Index will maintain a range-bound oscillation between 4000 and 4200 points before the Spring Festival, advising a continued focus on laggard growth styles, particularly future industries. In terms of individual stocks, 2371 stocks rose across the two exchanges, while 2973 fell, and 128 closed unchanged. A total of 67 stocks hit the daily upside limit, and 62 stocks hit the daily downside limit. At the close, the Shanghai Composite Index fell 0.26% to 4101.91 points, with a turnover of 1338 billion yuan. The Shenzhen Component Index declined 0.18% to 14281.08 points, with a turnover of 1671.1 billion yuan. The ChiNext Index dropped 0.20% to 3361.02 points.
In terms of fund flows today, main funds focused on buying into sectors like semiconductors, consumer electronics, and auto parts. Stocks with significant net main fund inflows included Industrial Fulian, Changdian Technology, and Sanhua Intelligent Controls.
Key developments include progress in China's research on liquid metal flexible electronics manufacturing, showing application prospects in aerospace. Recently, teams including the Technical Institute of Physics and Chemistry of the Chinese Academy of Sciences have made a series of advances in the field of liquid metal flexible electronics manufacturing, providing multiple innovative technical solutions for the high-performance, green, and scalable application of flexible electronics. The team's proposed non-destructive etching patterning technology has broken through the inherent bottlenecks of traditional additive and subtractive manufacturing processes. This technology regulates the interfacial adhesion between liquid metal and the substrate through an ethanol environment.
Passive component giant Yageo has issued another price hike notice for resistors, with increases of 15%-20%. Yageo stated that due to significant cost increases in its chip product lines, it has decided to adjust prices for some resistor products effective February 1st this year, with increases of approximately 15%-20%. Yageo had previously adjusted prices for specific tantalum capacitors and magnetic bead products and recently notified customers of another price increase. This is attributed to significant cost increases in chip product lines, particularly the soaring prices of precious metals like silver, ruthenium, and palladium.
The recycling and comprehensive utilization of end-of-life power batteries from new energy vehicles will be subject to full lifecycle supervision. Six departments, including the Ministry of Industry and Information Technology, jointly released the "Interim Measures for the Recycling and Comprehensive Utilization of End-of-Life Power Batteries from New Energy Vehicles" on the 16th. Following a "full-channel, full-chain, full-lifecycle" management approach, the measures will take effect on April 1, 2026. They focus on standardizing management across all sources of end-of-life power batteries, including battery production, vehicle scrapping, battery swap operations, and maintenance replacements. The measures keyly design systems like "integrated vehicle-battery scrapping," specifying that "for scrapped new energy vehicles missing power batteries, the vehicle shall be deemed incomplete, with specific methods to be另行规定 separately," thereby preventing situations where the flow of end-of-life power batteries becomes difficult to track.
For the market outlook, Orient Securities believes the short-term Spring Festival rally is not over, and the slow bull market persists. The overall performance of the A-share market is not particularly strong, gradually returning to a healthy and rational state. Recently, the more "overheated" sectors and stocks have experienced larger corrections, such as commercial aerospace and AI applications, which is directly related to Wednesday's combination of "deleveraging + massive sell orders." There is a high consensus on this among market participants. On the other hand, favorable news emerged after the market close: the People's Bank of China lowered the interest rates on various structural monetary policy tools by 0.25 percentage points, reducing the one-year rate for various relending facilities to 1.25%, with corresponding adjustments for other tenors. While the rate cut might benefit today's market trend, considering the cooling signals and the rapid shrinkage in turnover by trillions, stock indices are still expected to be primarily range-bound, temporarily lacking a clear direction. Structural opportunities in sectors or individual stocks are likely to continue, such as the intraday strength in themes like precious metals, the semiconductor industry chain, and tourism & hotels, filling the void left by the correction in hot sectors.
Shenwan Hongyuan suggests the current market is roughly in the high range of a "structural bull" phase, where interim adjustments and fluctuations are inevitable but their magnitude is expected to be relatively limited. Their chief A-share strategist, Fu Jingtao, judges that first, the large-wave bull market will likely conclude a stage; second, after the Spring Festival rally plays out, the market might enter a quarterly-scale phase of adjustment.
CICC, looking ahead to 2026, expects the growth rate of financial aggregates may continue to slow in the first half of 2026. In the first three quarters of 2025, factors like the expansion and front-loaded issuance of government bonds, coupled with a low base in 2024, led to significant improvement in the growth rates of total social financing, M1, and M2, establishing a relatively high base. Looking at the 2026 liquidity environment, regarding fiscal policy, 2026 might emphasize quality and efficiency over another significant expansion in aggregate volume. The broad fiscal deficit ratio is not expected to rise substantially in 2026. While government bond issuance will likely still be front-loaded, the year-on-year increase in scale might slow compared to 2025. On monetary policy, the communique from the PBOC Monetary Policy Committee's Q4 meeting largely continued the tone of downplaying the emphasis on financial aggregate targets. The implied rate cut expectations derived from the interest rate derivatives market have also significantly moderated compared to levels at the beginning of 2025.
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