This week saw adjustments in the three major indices: the Shanghai Composite Index fell by 1.27%, the Shenzhen Component Index dropped by 2.11%, and the ChiNext Index declined by 3.28%. How will the market develop from here? Let's examine the views of various institutions.

CITIC Securities states that Chinese capital markets have already priced in the "shift from virtual to real" economy ahead of time. There is no need to be anxious about short-term market volatility. Recently, risk appetite and liquidity in overseas markets have shown significant anomalies. Looking beyond short-term market movements, two underlying trends are observable: First, the urgency for the US and Europe to shift from virtual to real economies is intensifying, with critical minerals and supply chain security being prioritized. The policy stance of the newly nominated Federal Reserve Chair also reflects a pressing need to prevent capital idling and lower financing costs for the real economy. Second, disruptive innovation driven by AI is breaking down traditional monopolies and high-return sectors, with the software industry being the first affected recently, leading to noticeably increased anxiety within the sector. Both strategic security investments and emerging infrastructure and technology investments representing the future indicate that the US and Europe will face fiercer competition while balancing short-term shareholder interests against the strategic value of long-term infrastructure investments. These contradictions will repeatedly surface in capital markets. For investors long accustomed to earning "easy money," uncertainty in global financial markets will continue to rise. Risk assets overly reliant on distant cash flow projections or capital relay expectations are more prone to sustained valuation corrections. In contrast, China's capital market has already completed the pricing of the "shift from virtual to real" in recent years and is currently in the process of verifying and pricing "quality and efficiency improvements." There is no need to worry about short-term market fluctuations. For allocation, it is still recommended to base the portfolio on "resources + traditional manufacturing," accumulate non-bank financial stocks on dips, and increase exposure to the consumer and property chains.

Everbright Securities advises maintaining positions and holding stocks over the holiday. Short-term fluctuations are expected, but holding stocks during the holiday period is recommended. The institution believes this spring rally is still promising, with potential positive news expected in both policy and fundamental aspects in the coming months. However, market performance may not be smooth sailing; before the Spring Festival, the market might enter a brief period of consolidation and correction. Historically, market trading activity typically cools down before the Spring Festival, related to generally tighter liquidity before the holiday and decreased investor trading enthusiasm before a long break. Furthermore, based on historical reviews of bull markets, after a structural bull market breaks through previous consolidation ranges, a phased adjustment usually occurs. Nevertheless, investors are still advised to hold stocks over the holiday. After the Spring Festival, market trading activity is expected to pick up again. Combined with high-frequency holiday data and industry hot topics, the market may usher in a new round of upward movement.

Shenwan Hongyuan Strategy's weekly review and outlook suggest the lower bound of the consolidation range is gradually being identified. During consolidation phases, the best opportunities lie in new technological directions, waiting for new highlights to emerge. Secondly, opportunities arise after the lower bound of the consolidation range is identified. It is noted that around the Spring Festival, attention should be paid to rebound opportunities in the AI industry chain. Additionally, with redemption pressure on broad-based ETFs easing, non-bank financials are also expected to rebound. Finally, for medium-term opportunity-based allocations, trending tech and cyclical alpha sectors remain the focus. For trending tech, focus areas include overseas computing power chains, AI applications (the real opportunity in Hong Kong internet stocks), semiconductors, robotics, commercial aerospace, and energy storage. For cyclical alpha, focus on non-ferrous metals and basic chemicals. The extension of medium-term cyclical alpha investment might be the export/overseas chain. Furthermore, medium-term revaluation opportunities in non-bank financials are viewed favorably. Short-term rebounds around the Spring Festival are expected to show higher elasticity in sectors with medium-term opportunities.

Zheshang Strategy indicates the market is experiencing broad consolidation with ongoing style shifts; selecting good structure and waiting post-holiday is key. As the two "fast lanes" of technology and non-ferrous metals slow their advance, the market is gradually entering a consolidation rhythm. With the Spring Festival approaching, market trading activity has also decreased significantly. Looking ahead, due to the upcoming holiday and the potential "holiday effect," but considering previous adjustments have released some risks, the market is expected to experience relatively strong consolidation before the holiday. The main offensive opportunities are likely to emerge after the holiday. Additionally, it's important to note that in the bull market since September 24, 2024, technology growth and non-ferrous metals have seen relatively larger gains compared to finance, pro-cyclicals, and consumption. The style shift driven by this "netting" shows no signs of ending yet. It is believed that until a new main theme emerges, the market will continue with "high-to-low switching" and style "rebalancing" in the near term. Of course, considering current market sentiment and capital levels, the "systematic slow bull" trend is deemed unaffected, and a positive quarterly outlook is maintained.

Regarding allocation, based on the judgment of "market consolidation with style shift, subdued pre-holiday activity with post-holiday expectations," the following recommendations are made: For timing, medium-term positions should not fear short-term fluctuations; the view of a "systematic slow bull" remains, but portfolio elasticity should be moderately controlled. For style, continue shifting from growth to value styles, conducting moderate "rebalancing." Sector-wise, focus on relatively low-positioned sectors like securities, social services, building materials, and bank stocks near their annual moving averages. For individual stocks, prioritize those that have lagged in gains since the "9/24 rally," have potential for catch-up gains, and can hold above their annual moving averages.

Zhongtai Securities discusses the current allocation value of high-dividend sectors. It suggests seizing short-term trading opportunities in less crowded tech sectors and gradually transitioning to high-dividend, low-valuation allocations medium-term. Operationally, a phased response strategy is recommended. Before the Spring Festival, the market is still dominated by trading capital. Strategically, continue participating in tech sectors with a trend foundation, focusing on sub-sectors with relatively low crowding, good net capital inflow intensity, no significant previous main upswave, and having completed a round of adjustment as phased allocation targets. Key directions include AI applications, robotics, and semiconductor equipment. Medium-term, post the "Two Sessions," it is advised to gradually increase the allocation ratio of high-dividend, low-valuation sectors in the portfolio, focusing on sectors with stable cash flows and dividend capabilities like banking, food & beverage, and transportation to hedge portfolio volatility and enhance overall return certainty. Simultaneously, maintain relative caution towards consumer-related varieties with limited profit elasticity and unclear policy benefit pathways to avoid unnecessary drawdown risks during market style shifts.

Changjiang Securities anticipates a recoverable profit trend in the 2025 annual performance preview. The 2026 market outlook suggests a natural progression with the slow bull market continuing. 1) Profits: The inflection point for the profit bottom has appeared, with ample liquidity and capital expenditure gradually reflected in listed companies' performance. 2) Valuation: The stock-bond yield spread is near historical averages; the low-interest-rate era continues to provide upward momentum for valuations. Against the backdrop of medium to long-term capital entering the market, there is still significant room for improvement in the securitization ratio of Chinese stocks.

The industry allocation outlook points to technology's arrival and the gradual rise of cyclicals. From a major asset allocation - Pringle cycle perspective, US stocks and commodities remain favored. Following the policy guidance direction of the next Five-Year Plan, key directions like technology, domestic circulation, strategic security, and opening up are suggested for focus. Driven by tech manufacturing and some cyclical sectors, the market is expected to experience a more comprehensive bull market.

Kaiyuan Securities emphasizes "sticking to the basics" of investment during the bumpy phase of the bull market. A-shares are currently within a bull market logic. Investors are advised not to lose confidence in the positive trend due to very short-term fluctuations and adjustments. As long as the core drivers of this bull market do not significantly tighten or reverse, a bullish stance is maintained, still recommending a signal of a securitization ratio above 1.1 times. Structurally, the entire A-share market is still in a relatively safe environment, and from a securitization ratio indicator perspective, there is still room for expansion. Combined with the relative profit advantage of the TMT sector, the high beta of AI+ is still expected to find support at this stage.

Sector allocation recommendations are: (1) Internal repair and high-low switching within tech: defense, media (gaming), AI applications, Hong Kong internet, batteries, core AI hardware; (2) Beneficiaries of PPI improvement and broad anti-involution: non-ferrous metals, chemicals, photovoltaics, steel, power, machinery, insurance; (3) Medium to long-term core holdings: gold, optimized high-dividend stocks.

China Galaxy Strategy discusses how to position for the 2026 "Spring Festival red envelope" rally. The pre-Spring Festival market performance in the Year of the Horse shares commonalities with the past but also has its uniqueness. Recent trends conform to the pre-holiday style shift pattern. Before the 2026 Spring Festival, the market exhibited typical "pre-holiday risk aversion" characteristics. Shrinking turnover reflects a wait-and-see sentiment among funds. Capital flowed out of high-valuation tech and cyclical sectors, switching to value and consumption themes. In terms of sector rotation, defensive sectors like banking and food & beverage strengthened against the trend, while previously strong thematic sectors like computing hardware and non-ferrous metals saw significant corrections. Regarding uniqueness, as the spring rally started early, the growth style was realized in January; the "pre-holiday rally" remains to be further observed. Simultaneously, recent external environmental uncertainties have repeatedly caused disturbances, increasing volatility in global equity markets. The market generally expects the "seeking stability" style to continue before the holiday, with a potential style shift occurring after the holiday (around the "Two Sessions"). Pre-holiday hotspots may rotate periodically; low-volatility, high-dividend sectors like红利 (dividends), banking, and consumption are expected to continue attracting capital favor. The market may maintain range-bound consolidation, suggesting a balanced allocation. Post-holiday, with the policy window opening and risk appetite recovering, market focus may shift back to growth sectors with industrial catalysts and earnings certainty, such as AI applications, high-end manufacturing, and new energy. The pace is expected to be more moderate, making the slow bull market steadier.

Huajin Securities states the spring rally is not over; holding stocks over the holiday is advisable. The spring rally is not finished. Risks during the Spring Festival period may be limited, making it feasible to hold stocks over the holiday. (1) Economic and profit expectations may improve during this year's Spring Festival. Firstly, Spring Festival travel and consumption data might be positive. Secondly, property sales during this Spring Festival may see some recovery: first, due to a low base effect, the year-on-year growth rate of property sales during the Spring Festival might rebound; second, expectations for policies stimulating property sales are strong across regions, and the warming trend in property sales may continue during the holiday period. (2) Liquidity is likely to remain loose during the Spring Festival. Firstly, macro liquidity may stay loose: internationally, US January CPI data will be released on February 11th, and US retail data will be disclosed on February 17th; the US dollar index is expected to continue low-level fluctuations, with limited constraints from overseas on domestic loose liquidity. Domestically, the central bank might increase net injections amid seasonal liquidity tightness before the holiday. Secondly, stock market capital is expected to maintain a certain level before the holiday and may accelerate its return after the holiday. (3) Risk appetite is likely to remain neutral during the Spring Festival. Firstly, external geopolitical risks might still exist but have limited impact domestically: Sino-US博弈 (game/competition) risks are likely low during the holiday; Iran-US conflict and other geopolitical risks might persist but have limited impact on global capital markets. Secondly, expectations for further proactive policies around the holiday remain strong.

After short-term adjustments, technology growth and cyclicals may still relatively outperform. (1) Historical reviews show that after adjustments, leading sectors supported by policies and industrial trends may regain dominance. Firstly, after adjustments occur in a spring rally, the leading sectors before the adjustment often regain dominance, driven by policy support and upward industrial trends. Secondly, sectors with relatively low valuations or sentiment during the adjustment period may experience catch-up gains afterward. (2) Currently, after short-term adjustments, technology growth and cyclicals may still relatively outperform. Firstly, technology growth and some cyclical sectors receive short-term policy support, and their industrial trends continue upward: policy-wise, short-term policies on technological innovation and anti-involution may be further implemented; regarding industrial catalysts, short-term catalysts related to commercial aerospace, AI, etc., are continuous, while commodity prices related to non-ferrous metals and chemicals may continue fluctuating upward. Secondly, short-term catch-up gains are possible in sectors like pharmaceuticals, computers, chemicals, non-bank finance, and consumption: firstly, within growth, pharmaceuticals and computers, and within cyclicals, chemicals and steel, have relatively low historical percentile rankings in turnover proportion; secondly, sectors like non-bank finance, agriculture, forestry, animal husbandry, fishery, and food & beverage have low valuation percentiles.

CMSC discusses how the "Vash trade" and AI trade might evolve. Recent declines in domestic and overseas tech stocks are attributed partly to liquidity shocks from the Vash trade and partly to a lack of new short-term catalysts for AI tech, with Anthropic's new tools sparking concerns about the disruption of traditional software business models. It is believed that the hardest-hit Hong Kong market, especially the Hang Seng Tech Index, already possesses allocation value. Once the impact of the Vash trade subsides or new AI industry narratives form catalysts, the Hang Seng Tech Index is expected to experience catch-up gains. Overall, the market is expected to be mainly consolidative in February, with post-holiday indices likely stronger than pre-holiday. For the main offensive direction, previous price increase varieties are beginning to diffuse to petroleum & petrochemicals and food & beverage, while construction materials benefit from major projects under the 15th Five-Year Plan. Accelerated rotation may be the most important characteristic of February.