CITIC SEC has released a research report stating that, looking ahead to February, with earnings expectations for Hong Kong stocks having undergone significant adjustments and the disturbances from both internal and external capital flows having subsided, it is judged that the spring rally in Hong Kong stocks since late December 2025 is likely to continue. The overall trend is expected to show relative outperformance by large-cap stocks before the Spring Festival, with growth industries supported by policy directions performing even better. After the Spring Festival, attention should be paid to the next peak period of share lock-up expirations, which may impact liquidity expectations for Hong Kong stocks. In the short term, it is recommended to focus on three main themes: 1) the policy direction of the "15th Five-Year Plan," including biomanufacturing, embodied AI, and 6G; 2) sectors where policies are driving a reversal in fundamental expectations, such as food delivery platforms and real estate; and 3) non-bank financial institutions benefiting from the spring rally. The main views of CITIC SEC are as follows.

Disturbances from fundamentals and capital flows have passed. From a fundamental perspective, the downward revision trend in earnings expectations for major Hong Kong stock indices has slowed since the end of 2025. The subsequent concentrated period for the disclosure of Hong Kong-listed companies' annual reports is from late March to early April, placing the market in a short-term earnings vacuum where fundamental disturbances have subsided. From a capital flow dimension, the continuous rise in US and Japanese government bond yields during the fourth quarter of 2025, coupled with investor concerns over issues such as the nomination of the next Fed Chair, led to a decline in risk appetite among overseas investors for Hong Kong stocks. Regarding share lock-up expirations, according to Wind data, the expiration market value dropped to HKD 45.6 billion and HKD 71.1 billion in January and February 2026, respectively, showing a significant decrease compared to December 2025. Therefore, it is judged that short-term movements in Hong Kong stocks will revert to being dominated by domestic policies and expectations for listed companies' fundamentals, with the market's focus expected to shift to the spring rally and policy expectations for the "15th Five-Year Plan."

The Hong Kong stock market exhibits a relatively pronounced spring rally phenomenon. Over the past eleven years during the spring rally period in Hong Kong stocks, the Hang Seng Index achieved an average return of 2.4%, with an average weekly win rate of 70.8%. Notably, the performances in 2019, 2021, and 2023 were particularly impressive, with average gains reaching 10.6%. Conversely, in 2016 and 2024, due to factors such as being at the tail end of a bear market and liquidity shocks, the spring rally periods saw declines of 12.0% and 7.6%, respectively, with rallies only gradually unfolding after the Spring Festival. Comparatively, Hong Kong's spring rally is more concentrated in January, whereas the A-share spring rally is more focused in February. From a fund flow perspective, over the eleven years from 2015 to 2025, the average proportions of southbound net inflows in January and the combined January-February period relative to the full year were 19.3% and 27.9%, respectively. However, excluding the outliers of 2018 (where Jan-Feb net inflows exceeded the full year) and 2021 (where January single-month net inflows reached HKD 310.6 billion), the average for the remaining eight years drops to 5.7% and 10.1%, respectively. In terms of style, large-cap stocks in Hong Kong typically outperform before the Spring Festival, while small-cap stocks tend to perform better after the holiday. At the industry level, the Information Technology, Energy, Telecommunications, and Raw Materials sectors have historically shown the largest average gains during the spring rally, whereas Utilities, Consumer Staples, and Real Estate & Construction have relatively underperformed.

Five-Year Plans guide industrial development direction and serve as an important basis for capturing long-term investment opportunities. Historically, market performance in the period from the release of the Five-Year Plan proposal to the formal release of the plan has often been better than the performance after the plan's official publication. Simultaneously, Five-Year Plans often indicate future industrial trends; for example, during the "14th Five-Year Plan" period, sub-sectors such as China's new energy industry, artificial intelligence industry, and semiconductor industry continued to develop, with market performance significantly outperforming the broader market. The "15th Five-Year Plan" proposal and the Central Economic Work Conference have outlined the direction for China's industrial development in 2026 and during the "15th Five-Year Plan" period. During the "15th Five-Year Plan" period, strategic emerging industrial clusters such as new energy, new materials, aerospace, and the low-altitude economy are expected to usher in new development opportunities. Future industries like quantum technology, biomanufacturing, hydrogen and nuclear fusion energy, brain-computer interfaces, embodied AI, and sixth-generation mobile communication (6G) may receive new policy support, while traditional industries such as chemicals, machinery, and shipbuilding will undergo further quality upgrades. Meanwhile, against the policy backdrop emphasizing domestic demand, the combination of "low expectations and low valuations" plus "stabilization trends underpinned by resilient consumption characteristics" is expected to enhance capital preference for consumer sector allocations.

Risk factors include: 1) Escalation of friction between China and the US in technology, trade, and finance; 2) China's policy intensity, implementation effectiveness, and economic recovery falling short of expectations; 3) Tighter-than-expected domestic and international macro liquidity; 4) Further escalation of conflicts in regions such as Russia-Ukraine and the Middle East; and 5) A slower-than-expected stabilization in the volume and price of real estate sales in China.