As the Year of the Snake concludes, a review of its market performance reveals strong profitability effects. The technology sector, in particular, led the gains across both exchanges, generating significant returns. The market displayed a divergent pattern, with significant rallies in dividend stocks like bank shares and substantial increases in the STAR and ChiNext boards, representing technological innovation directions, contributing to robust profitability. However, many traditional sectors did not experience similar gains.
The Shanghai Composite Index surpassed the 4,000-point mark during the Year of the Snake, briefly breaking through 4,100 points, solidifying the trajectory of this slow and long bull market. The underlying logic supporting this trend includes policy support, such as the gradual implementation of measures to stabilize economic growth and policies advancing capital market reforms. Additionally, listed companies have increased cash dividend distributions, strengthened IPO entry controls, and enhanced overall quality.
From a liquidity perspective, China's household savings saw substantial growth over the past year, with deposit balances exceeding 165 trillion yuan. Historically, these savings primarily flowed into the property market. However, with the real estate sector currently subdued, a portion of these funds is seeking opportunities in the capital markets. As market trends solidify, more household savings are expected to enter the markets directly through new accounts or indirectly via fund purchases, providing a continuous influx of incremental capital.
Breakthroughs in technological innovation, such as the emergence of the DeepSeek large model and the gradual commercial application of humanoid robots, alongside AI+ initiatives, highlight new future growth opportunities. Foreign investors have also increased their allocation to Chinese assets. A depreciating U.S. dollar index and a appreciating Renminbi have further attracted foreign capital into RMB-denominated assets, providing a solid foundation for the current market rally.
Regarding risks and challenges, current operational data from the real economy remains suboptimal and requires further improvement. Consumer growth rates remain low, and price levels maintain relatively modest growth. Last year's CPI showed zero growth, while January's year-on-year CPI turned positive, indicating a slight recovery in consumer demand. Implementing more forceful measures to boost domestic demand and stimulate consumption is crucial for revitalizing the economic fundamentals, which would underpin a slow, long-term bull market in the Year of the Horse.
The A-share market has historically exhibited a seasonal pattern known as the "spring offensive." Following the conclusion of the cross-year rally, the market experienced a period of adjustment. With the Spring Festival approaching, a spring offensive may emerge post-holiday. Key indicators to monitor include whether daily trading volume expands effectively after the holiday. Currently, pre-holiday trading volume has contracted, likely due to reduced activity from investors observing the holiday. Post-holiday, new market entrants may increase trading activity, potentially leading to a significant rise in daily volume—a positive signal. The market may also see a strong opening.
Secondly, the direction of foreign capital flows warrants attention. Before the holiday, Hong Kong stocks experienced sustained adjustments and weaker performance, while A-shares demonstrated relative strength. Whether foreign capital flows into Hong Kong and A-shares post-holiday will be a significant signal for many investors. Several foreign investment banks expressed optimistic views on these markets before the holiday; observing if their actions align with these views through capital inflows will be telling.
Thirdly, upcoming economic data for January should be monitored. Recently released CPI and PPI figures already show improvement, with CPI in positive growth territory and a narrowing year-on-year decline in PPI, indicating recovering market demand. Whether other data points, such as fixed asset investment, import-export figures, and industrial value-added, show marked improvement is another key signal, as economic recovery is fundamental to sustaining the slow bull market.
Finally, investor sentiment indicators, such as the recovery in new fund issuance, are crucial. An increase in new fund issuance would indicate more positive investor outlooks. In January, many fixed-term deposits matured, but due to market adjustments in the latter half of the month, a significant portion was redirected to insurance or bank wealth management products rather than capital markets. Post-Spring Festival, whether deepening market trends attract more household savings into capital markets is another vital signal to watch closely.
Currently, the likelihood of a spring offensive after the holiday appears high. In the Year of the Snake, technology stocks undoubtedly outperformed. While the technology sector remains a focus in the Year of the Horse, it represents one investment theme among several, not the sole one. Other sectors are expected to experience rotational gains, creating broader profitability effects. After significant rallies, the technology sector shows mixed quality, with both genuine and superficial players. A key investment approach for A-share technology stocks now involves focusing on leading companies within various supply chains, often listed in the U.S., such as those in the Tesla, Nvidia, Apple, or Google ecosystems. Market attention is on specialized leaders securing orders from these major firms, as their performance is likely to materialize.
Certainly, many technology stocks have surged based on thematic hype rather than substance, necessitating careful distinction. For instance, the humanoid robot sector, which performed well in 2025, primarily consists of auto parts companies transitioning into robot components. The 2025 rally in this sector was largely conceptual, with stock prices surging upon announcements of entry into humanoid robotics—a trend difficult to verify or disprove short-term.
By 2026, the focus shifts to order competition, identifying which auto parts companies secure contracts from major robot manufacturers. Those securing orders may continue rising, while others may see declines as their claims are disproven. Subsequently, the emphasis will likely shift to performance delivery, where technology stocks demonstrating actual earnings growth continue to advance, while those failing to deliver decline.
Thus, 2026 can be viewed as a verification phase for many technology stocks, at least regarding orders, distinguishing genuine from superficial players. Market capitalization can also serve as a reference. Generally, intelligent capital influences stock pricing. Genuine technology firms with secured orders and eventual performance delivery often attract smart money, leading to significant market cap growth. Those lacking real R&D capability and unlikely to deliver results typically do not sustain investor interest. While market mispricing occurs, confidence in market forces remains. When allocating to technology stocks, investors might first identify leading companies by market cap before assessing their sustainable growth potential. However, unpredictability persists, necessitating ongoing monitoring of company announcements for significant orders or performance updates to enhance investment certainty. Where possible, increasing on-site research to assess actual corporate competitiveness can improve confidence in navigating this bull market.
The year 2026 marks the beginning of the 15th Five-Year Plan period, with technological innovation undoubtedly a key investment theme. Investors should identify technology leaders achieving genuine technological breakthroughs and eventual earnings growth, moving beyond the sector-wide momentum seen in 2025. During thematic rallies, distinguishing between genuine and superficial players is often challenging. Therefore, in the Year of the Horse, investment opportunities and risks coexist. Adhering to value investing principles and basing decisions on fundamental analysis to assess a company's investment worth is paramount.