1. Since late November, the macro environment facing the A-share market has "reverted," with style characteristics returning to pre-late October conditions. However, the issue of limited upside persists: while optical connectivity Alpha logic plays out, concerns remain over declining capital expenditures from U.S. tech giants in 2026, keeping pressure on the AI industry chain's Beta. A breakout in optical connectivity may not drive breakthroughs in other segments of the AI sector. The 2025 structural bull market remains positioned in a high-range zone, currently still in a phase of high-range volatility.
Expectations of early pro-growth stimulus in November, a downward revision in Fed easing expectations, cyclical price hikes, and projections for PPI to turn positive year-on-year by mid-2026 provided interim support, leading to outperformance of cyclical and value stocks while tech growth adjusted. However, since late November, reduced expectations for pro-growth measures, a return of Fed easing expectations, and overseas computing power Alpha logic have driven optical connectivity to break upward, with other tech growth sectors rebounding and cyclical/value stocks adjusting—reverting to pre-late October market dynamics.
2. The 2025 Central Economic Work Conference emphasized "strengthening internal resilience to tackle external challenges." Markets often anticipate unconventional measures, but only late 2024 saw such moves. A-share style characteristics have "reverted," leaving limited short-term expectation gaps. If economic outcomes in the first half of 2026 show room for improvement, additional pro-growth efforts in the second half will likely deliver marginal economic gains.
Key policy takeaways include: 1) Attributing most of China’s economic challenges to "developmental and transitional issues." 2) Economic policies must balance counter-cyclical and cross-cyclical adjustments, prioritizing quality and efficiency. 3) Stimulating domestic demand includes a "rural-urban income growth plan," shifting focus from consumption incentives to more fundamental income-boosting policies, aligning with heightened emphasis on employment. 4) Regional tech innovation hubs (Beijing-Tianjin-Hebei, Yangtze River Delta, Greater Bay Area) aim to boost total factor productivity through innovation and phasing out inefficient firms. 5) Strengthening a unified domestic market and curbing "internalized competition." 6) Reordered priorities: livelihood/employment and green transition moved forward, while risk prevention and real estate sections were deprioritized.
3. The mid-term outlook remains a "two-phase bull market": the 2025 Phase 1 (tech-driven structural bull) is already in a high-range zone, currently undergoing quarterly-level volatility, with potential triggers for a "bull market doubt" correction. Phase 2 is expected in the second half of 2026, driven by cyclical fundamental improvements, new tech trends, household asset shifts to equities, and China’s rising global influence—a comprehensive bull market.
2026 style projections: Cyclical/value styles may dominate H1 2026, with tech/advanced manufacturing Alpha-logic sectors potentially leading the next bull phase. H2 2026’s broad bull market could see cyclical stocks ignite the rally, but tech/advanced manufacturing may ultimately outperform.
The Spring rally remains a minor-cycle event. After optical connectivity fully reflects Alpha logic (short-term valuations suggest further upside), renewed high-range volatility may emerge. Other tech growth sectors offer oversold rebound opportunities. Policy and thematic plays (e.g., commercial aerospace, robotics) will drive returns, with additional focus on marine economy, energy security, and northern flood infrastructure. Supply-driven price cycles, buoyed by mid-2026 PPI recovery expectations, may show resilience—particularly in cyclical Alpha, industrial metals, and basic chemicals.
Risks: Overseas recession exceeding expectations; domestic recovery falling short.
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