Recent declines in global technology stocks have been influenced by liquidity shocks from Walsh-related trades and a short-term lack of new catalysts in the AI sector. The release of new tools by Anthropic has sparked concerns about the disruption of traditional software business models. We believe that the hardest-hit Hong Kong stocks, particularly the Hang Seng Tech Index, now present allocation value. Once the impact of Walsh trades subsides or new catalysts emerge in the AI industry narrative, the Hang Seng Tech Index is expected to experience a catch-up rally. Overall, the market is likely to see fluctuations in February, with post-holiday indices expected to perform stronger than pre-holiday levels. In terms of key sectors, earlier price increases are spreading to petroleum and petrochemicals, as well as food and beverage industries. Construction and building materials are benefiting from major projects under the 15th Five-Year Plan. Accelerated sector rotation may be the most significant characteristic of February.

Looking ahead at the potential development of Walsh and AI trades: On January 30, Trump nominated Walsh as Federal Reserve Chair, whose hawkish monetary policy expectations triggered market concerns, leading to a rebound in the US dollar index and declines in emerging markets and commodities. If Federal Reserve interest rate cut expectations shift toward more accommodative policies, the US dollar index continues to fall and enters a downward trend, and various assets show signs of stabilization or significant decreases in volatility, it would indicate the substantial conclusion of the current Walsh trade impact. However, several important Walsh-related milestones in the coming months warrant attention, and trading around Walsh policies may see fluctuations. The release of AI plugin tools by Anthropic, disrupting traditional software business models, triggered sell-offs in related US concept stocks and broad declines in technology shares. Nevertheless, this adjustment appears more structural than fundamental. For China, the SaaS industry maintains strong prospects due to robust digital transformation demand, with AI serving more as an enabling tool. Recent simultaneous declines in domestic and international technology stocks are affected by Walsh trades and lack of AI catalysts. The Hang Seng Tech Index already possesses allocation value and is positioned for a catch-up rally once impacts subside or new catalysts appear. Overall, February markets are expected to fluctuate, with post-holiday indices likely outperforming pre-holiday levels. Key sectors show price increases spreading to petroleum, petrochemicals, and food/beverage industries, while construction materials benefit from 15th Five-Year Plan projects. Accelerated rotation remains February's key feature.

This week, A-shares experienced fluctuating declines primarily due to: (1) Continuously shrinking trading volumes approaching the Spring Festival, with accelerated sector rotation under dominant存量 funds; (2) Significant volatility and repeated weakness in US tech stocks, combined with fluctuations in overseas precious metals dragging down A-share sentiment; (3) Declining risk appetite limiting breadth of gains, with capital favoring low-position stocks over high-position ones, leading to retreats in high-volatility sectors and gains in low-position sectors, lacking conditions for index breakthroughs.

January manufacturing PMI declined month-over-month, while heavy truck sales showed expanded year-over-year growth. Areas with improved conditions this week include: 1) Rising tungsten and molybdenum prices, declining coal inventories; 2) Increasing prices of traditional Chinese medicines and Feitian Moutai wholesale prices; 3) Expanded year-over-year growth in average daily power generation at key power plants; 4) Sustained high TMT sector activity, with continuous price increases for DDR5 and NAND Flash, and expanded three-month rolling year-over-year growth in December North American PCB orders. Subsequent attention should focus on sectors with high or improving conditions like petrochemicals, power, construction machinery, baijiu, power, and semiconductors.

Financing net outflows occurred alongside ETF net subscriptions, with reduced net减持 scale by major shareholders. Financing funds saw net outflows of 34.59 billion yuan over the first four trading days; newly established equity-oriented public funds totaled 10.08 billion units, decreasing by 23.01 billion units from the previous period; ETF net subscriptions corresponded to 9.53 billion yuan net outflows. Financing funds showed net purchases in construction decoration, power equipment, and public utilities; IT ETFs saw substantial subscriptions while materials ETFs experienced significant redemptions. Major shareholders' net减持 scale decreased with reduced planned减持 scale.

Spring Festival marketing intensifies competition while AI applications accelerate industrial penetration. Tencent Yuanbao officially launched a 1-billion-yuan Spring Festival cash red envelope campaign on February 1, allowing users to participate by updating apps to version 2.55.0, with individual red envelopes reaching up to 10,000 yuan. Tencent's Board Chairman Ma Huateng explicitly stated this aims to recreate WeChat's red envelope phenomenon from 11 years ago, positioning Spring Festival red envelopes as AI applications' "D-Day" to replicate WeChat Pay's market turnaround success through Spring Festival Gala red envelopes.

Overall A-share valuation levels declined this week compared to last week, with the Wind All-A Index PE (TTM) at 17.99, at the 72.9% historical percentile. Valuation changes showed divergence across indices this week, with food/beverage, real estate, and beauty/personal care leading gains, while nonferrous metals, electronics, and computers led declines.

Risk warnings include economic data falling short of expectations, incomplete policy comprehension, and overseas policies tightening beyond expectations.