This week, the A-share market delivered a stellar performance. Major broad-based indices generally closed higher. Among the key indices, the CSI 500, the ChiNext Index, and the SME 100 recorded relatively larger gains, while the SSE 50, the Shanghai Composite Index, and the CSI 300 saw comparatively smaller increases. From a valuation perspective, indices like the STAR 50 and the Wind All A Index currently show relatively high valuation percentiles; as of December 26, 2025, their PE (TTM) percentiles since 2010 were all above 85%.

Small-cap growth stocks outperformed this week, with significant divergence in the performance of Shenwan primary industries. Sectors such as nonferrous metals and national defense led the gains, while personal care and social services were among the biggest decliners. In terms of market style, only large-cap value stocks saw a slight decline, with all other style indices closing higher, led by small-cap growth. Industry-wise, the Shenwan primary sectors showed mixed trends; nonferrous metals, national defense, power equipment, and electronics were top gainers, whereas personal care, social services, banking, and coal were among the top losers.

Key events unfolded this week across policy, industry, and international fronts. On the policy side, the People's Bank of China announced arrangements for a one-time credit repair policy, stipulating that qualified overdue information will not be displayed in personal credit reports. The national housing and urban-rural development work conference outlined key priorities for real estate development in 2026, with Beijing further optimizing and adjusting its property policies. Additionally, the central bank recently held its Q4 2025 regular meeting, reiterating the continuation of an appropriately accommodative monetary policy.

In the industrial sector, Beijing issued the first batch of special license plates for L3-level autonomous vehicles on highways, marking a national first. The 2025 Computing Power Internet Conference was held in Chengdu, Sichuan. Furthermore, the National Press and Publication Administration recently released the approval information for domestic and imported online games in December 2025. Internationally, the European Union extended its economic sanctions against Russia for another six months, until July 31, 2026, while the Japanese government finalized its budget for fiscal year 2026, setting a new record high.

The A-share market continues its steady ascent. Recently, A-shares have maintained their strengthening trend; as of this Friday, the Shanghai Composite Index marked its eighth consecutive day of gains, a streak last seen near the 3,000-point level at the start of the rally in April. The Shenzhen Component Index, the ChiNext Index, and the CSI 300 also rose for six straight days. Trading volume expanded modestly, surpassing 2 trillion yuan again on Friday, with the weekly turnover reaching 9.83 trillion yuan, the highest in nearly six weeks.

Policy support is expected to persist, coupled with anticipated active inflows of various funds, suggesting a potential for oscillating upward movement in the market. Historically, the A-share market has almost always experienced a "spring rally" each year. Concurrently, ongoing policy impetus is likely to keep economic growth within a reasonable range, further solidifying the foundation for a prosperous capital market.

Moreover, the release of policy dividends is poised to boost market confidence, thereby attracting increased capital inflows from diverse sources.

For sector allocation, considering historical patterns and the current market environment, focus is advised on growth and consumer sectors. Thematically, investors might consider opportunities in the commercial aerospace concept on potential dips. Historically, during "spring rallies," sectors like TMT and advanced manufacturing have demonstrated greater elasticity. Beyond the traditional growth areas, the consumer sector also warrants attention in this rally. On one hand, current policies place significant emphasis on the consumer sector, which is likely to benefit from continued policy catalysts. On the other hand, the consumer sector has underperformed relatively this year and may attract interest from funds that missed earlier gains. Thematically, the commercial aerospace sector is expected to maintain its strong momentum; any short-term pullbacks could present buying opportunities for investors.

Several risks require analysis. These include potential delays in policy implementation, a significant downturn in market sentiment, economic growth falling substantially short of expectations, and a major deterioration in Sino-US relations.