CICC has released a research report noting that the market experienced structural divergence in February. With the convening of China's "Two Sessions" in March, market sentiment is expected to receive a boost. Supported by factors such as the reshaping of the global monetary order, the proliferation of AI applications, and domestic growth stabilization and reforms, the market's steady and progressive trend is likely to continue. The current period remains a "window of opportunity" for strategic allocation. The recommendation for March is a dual-strategy approach focusing on both growth and cyclical sectors. 1) With AI technology advancing rapidly, attention should be paid to related industry chains such as cloud computing infrastructure, optical communication, energy storage, and semiconductors. On the application side, focus areas include autonomous driving, robotics, and consumer electronics. 2) The cyclical sector rally is currently at an early stage. Considering capacity cycles and companies' efforts to expand overseas markets, sectors like non-ferrous metals, chemicals, power grid equipment, and construction machinery are worth monitoring. 3) The entry of medium- to long-term funds into the market is a long-term trend. Selecting high-dividend leading companies based on strong cash flow, low volatility, and dividend certainty is advised, such as those in white goods, petroleum and petrochemicals, and utilities. CICC's main views are as follows.
In February, the market showed structural divergence, with the "price increase" theme performing notably well due to its certainty. This was driven on one hand by sectors related to rising geopolitical risks and resource security, such as non-ferrous metals, petroleum and petrochemicals, and oil shipping, and on the other hand by growth sub-sectors benefiting from AI-related investment expansion, like memory, PCBs, and MLCCs. The convening of the "Two Sessions" in early March is conducive to boosting market sentiment. As this year marks the beginning of the "15th Five-Year Plan," market expectations for the implementation of growth-stabilizing policies are positive. Medium- to long-term reforms related to consumption, livelihoods, technology, and energy are expected to be gradually deployed and implemented during the sessions. Supported by the restructuring of the global monetary order, the promotion of AI applications, and domestic growth stabilization and reforms, the market's steady and progressive trend is likely to persist, making the current period a "window of opportunity" for allocations.
Sector performance overview: 1) Energy and basic materials: Commodities experiencing price increases are supported by demand and earnings certainty. Among the major commodities tracked, energy (oil, coal) and non-ferrous metals performed well in February. Prices for thermal coal, WTI crude oil, London gold, copper, lithium carbonate, praseodymium-neodymium oxide, tungsten bars, antimony, and the Nanhua Glass Index increased by 8%, 3%, 8%, 2%, 7%, 18%, 20%, 4%, and 1% month-on-month, respectively. In contrast, most property-related commodities remained weak, with coking coal, coke, iron ore, the chemical product price index, the cement price index, zinc, and cobalt falling by 5%, 5%, 5%, 2%, 1%, 2%, and 3%, respectively. Rebar and aluminum prices were largely flat. Recent significant increases in Middle East geopolitical risks, along with supply shocks and risk aversion, have pushed up crude oil and non-ferrous metal prices. On March 2, OPEC+ core countries announced plans to increase oil production in April, which may help counterbalance upward pressure on oil prices. The U.S. CPI fell to 2.4% year-on-year in January, below expectations. While the "quantitative tightening" stance faces short-term constraints from political and market factors, expectations for further Fed rate cuts within the year remain substantial.
2) Industrial goods: Global AI-related manufacturing investment is in an expansion cycle. In machinery, both domestic and international demand for construction machinery is strong. Domestic excavator sales rose 61% year-on-year in January, while export sales grew 41%, mainly benefiting from the mild recovery in emerging market economies. In power equipment, domestic power battery installations totaled 42.0 GWh in January, down 57.2% month-on-month but up 8.4% year-on-year. Prices across the photovoltaic industry chain declined in February, with polysilicon, polysilicon wafers, solar cells, and PV module prices falling 7%, 8%, 2%, and 0% month-on-month, respectively. In the automotive sector, domestic vehicle sales dropped 3% in January. Future opportunities in the industry are expected to shift towards themes like overseas expansion and autonomous driving. Global AI-related manufacturing investment is expanding, benefiting sub-sectors in the AI infrastructure chain such as PCB equipment and materials, and liquid cooling.
3) Consumer goods: Traditional consumption requires a boost. Sales data for some tracked goods indicate that domestic consumption needs improvement. In January, sales of washing machines, refrigerators, and air conditioners changed by +0.6%, -2.4%, and +12.7% year-on-year, respectively. The wholesale reference price for Feitian Moutai declined after the Spring Festival. As of before the holiday, the average live hog purchase price was 14 yuan/kg, largely unchanged from the previous month, with ample supply in the hog market. By the end of 2025, the national hog inventory reached 429.67 million head, an increase of 2.24 million from the end of the previous year, and the breeding sow inventory was 102% of the normal retention level. Benefiting from the extended holiday period and local government subsidies, domestic consumption performed well during the Spring Festival. Current growth-stabilizing policies are tilting towards consumption, focusing on supply-side optimization and reducing consumption restrictions on the supply side, and stabilizing expectations and benefiting livelihoods on the demand side. The "15th Five-Year Plan" proposal emphasizes "closely integrating investment in physical capital and human capital," improving the income distribution system, and enhancing social security in education, childbirth, parenting, and elderly care, which should help boost household consumption confidence from a medium- to long-term perspective.
4) Technology: AI applications continue to iterate. New AI technologies and applications are in a phase of continuous deployment and promotion. In February, the AI agent OpenClaw gained rapid attention. OpenAI's release of GPT-5.3-Codex marked the first instance of AI participating in its own development. Anthropic launched Claude Sonnet 4.6, and Chinese applications like ByteDance's Seedance 2.0 were successively released and updated, showcasing significant cost-performance advantages. From February 9 to 15, the weekly call volume for China's large AI models reached 4.12 trillion tokens, surpassing the U.S. figure of 2.94 trillion tokens for the first time. AI technological iteration may pose a threat to internet applications with low barriers, light assets, and lack of competitiveness. However, computing power upgrades are driving upstream demand, with AIDC and cloud services maintaining high activity levels. Components like PCBs, MLCCs, and memory are facing supply shortages and rising prices. On the terminal demand side, domestic mobile phone sales fell 17% year-on-year in January, while sales of laptops and computer hardware/displays/peripherals declined 20% and 7% year-on-year, respectively. The semiconductor sector remains highly active, with global semiconductor sales up 37% year-on-year in January, and sales in China rising 34%. The issuance of domestic game licenses has normalized, with 152 licenses granted in February.
5) Finance: The "steady progress" of the A-share market supports non-bank sector activity. In 2025, premium income in the insurance industry grew 7% year-on-year, while total assets increased 15%. The average daily turnover for all A-shares in February was 2.3 trillion yuan, and the margin trading balance stood at 2.7 trillion yuan by month-end. Individual investor enthusiasm for entering the market increased in January, with 4.92 million new A-share accounts opened on the Shanghai Stock Exchange, up 89% month-on-month and 213% year-on-year.
6) Real estate: Policies aim to reduce inventory, with supply-demand structures in first-tier cities showing marginal stabilization. In February, commercial housing sales area in 30 major cities was 3.93 million square meters, up 11% year-on-year but down 33% month-on-month. Regarding housing prices, in January 2026, the new residential and second-hand residential components of the housing sales price index for 70 major cities fell 3% and 6% year-on-year, respectively. Referencing CICC's real estate team views, recent positive changes have emerged in the housing supply-demand structure in some leading cities, and policy coordination may accelerate localized price stabilization.
March recommendation: Adopt a dual-strategy focusing on "Growth + Cyclical" sectors. 1) With rapid AI advancements, focus on related industry chains like cloud infrastructure, optical communication, energy storage, and semiconductors. Application-side interests include autonomous driving, robotics, and consumer electronics. 2) The cyclical sector rally is early-stage; consider capacity cycles and corporate overseas expansion, highlighting non-ferrous metals, chemicals, power grid equipment, and construction machinery. 3) The influx of medium- to long-term capital is a sustained trend. Select high-dividend leaders based on cash flow quality, volatility, and dividend stability, such as in white goods, oil & petrochemicals, and utilities.
Overweight sectors for March: Non-ferrous metals, Machinery, Electronic Hardware, Power Equipment, Defense & Military Industry. Underweight sectors for March: Construction & Engineering, Textiles & Apparel, Tourism, Hotels & Catering, Education, Light Industrial & Home Furnishings.
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