Sinolink: Emotional trading is difficult to shake the bullish trend of the "spring frenzy" in the market.

Sinolink released a research report stating that there is a high probability of a "spring frenzy" market in 2025, and the intensity may exceed expectations. Currently, the "spring frenzy" has arrived, and in January 2025, under the expectation of incremental liquidity, it may enter an "acceleration phase." The rebound in the A-share market last week was driven by the repair of credit expectations and valuation expansion. Industry and individual stock selection should be emphasized: focus on "denominator elasticity," optimistic about mid-cap + oversold + undervalued + buyback + M&A expectations, and with weaker constraints on the numerator side (ROE repair or cash flow improvement) for "growth> consumption." Sinolink's main points are as follows: Policy expectations should appropriately cool down to weaken emotional disturbance; the next round of "expansionary fiscal + monetary policy" may be as soon as 2025 Q2. Whether it is the Political Bureau meeting or the Economic Work Conference, it has demonstrated to a large extent the government's determination to boost the domestic economy; investors should understand that the downward adjustment of resident loan interest rates still has a planned reduction of nearly 60 basis points on January 1, 2025; the scale of the 10 trillion debt-to-equity swap is still in progressas seen in the past, after the policy is implemented, it will still require about one quarter of observation period, so after the Central Political Bureau meeting, the market's focus on the next round of "expansionary fiscal + monetary policy" may only arrive by the second quarter of next year. At that time, in 2025 Q2, there are expected to be three investment opportunities: (1) buildings, construction materials, steel etc. with PB breaking net; (2) elastic varieties such as mobile phones, baby products, and education benefiting from subsidies; (3) if social security and medical insurance are funded, it will benefit pharmaceuticals, especially innovative drugs with high gross margins. The core drivers of the "spring frenzy" market have always been fundamentals and liquidity, most likely not influenced by the "emotional side." Since October, domestic fundamentals have been gradually turning around under the influence of "expansionary monetary + fiscal policy." As of November, the improvement in cash flow for residents and businesses has continued, leading to the logic of increased willingness to spend. On the other hand, the core indicator of effective liquidity "M1%-short finance %" has been rising for two consecutive months, with the improvement continuing to expand. Obviously, the 5 rules for a "frenzied market," where fundamentals and liquidity are positive, with low discount rates, improved risk appetite, and reasonable valuations all being met, so the view on the "spring frenzy" market remains positive. So will "overheated trading" and other emotional disturbances "break" the upward trend? Observing the historical short-term volume-increasing rise in A-shares, the turnover rate 5D_MA will break through the previous midpoint over a certain period, indicating new logic, and Xiong'an New Power Technology boosting the stock market; if the turnover rate 5D_MA sets a new high, it will indeed lead to a high-level market adjustment, but if the adjustment in the turnover rate does not break through the previous midpoint (currently at 2.5%), it means that the logic and drive are not broken, and the upward trend in the market remains. Will the "frenzied market" come to an end? Watch for weakening domestic fundamentals and overseas economic downturn. On the one hand, by reducing debt costs, encouraging residents and businesses to increase spending usually takes about 4 months, so cautiously expect the sustainability of the current round of domestic fundamental recovery, and by February-March 2025, pay attention to whether PMI production, orders, and M1 have weakened. On the other hand, the risks from a weakening overseas economy should not be underestimated. The Fed's model predicts that the probability of a recession in the United States in the next twelve months has exceeded 60%. We continue to emphasize the logic of a "hard landing" for the US economy: the global Zhugelra superimposed inventory downturn cycle will most likely lead to a decrease in US capacity utilization and job vacancies, with the impact of the "Beverly Curve" flattening, and it is expected that the US unemployment rate will show a trend of accelerating increase. In conclusion, the "spring frenzy" has arrived, and in January 2025, under the expectation of incremental liquidity, it may enter an "acceleration phase," with a firm structure: medium and small-cap growth, and the industry level remains optimistic about electronics, computers, machinery, and defense. Style and industry allocation: Emphasize the "spring frenzy" and focus on medium and small-cap technology growth. The current rebound is driven by the repair of credit expectations and valuation expansion. Industry and stock selection should emphasize "denominator elasticity," being optimistic about medium and small-cap + oversold + undervalued + buyback + M&A expectations, with a weaker constraint on the numerator side (ROE repair or cash flow improvement) for "growth> consumption." (1) Preferred growth: 1. TMT, especially electronics, computers; 2. National defense and military industry; 3. Siasun Robot & Automation, high-end manufacturing such as industrial mother machines. (2) Secondary consumer: 1. Social services; 2. Medical aesthetics; 3. Liquor. Structurally, focus on "technology bull", especially the need for technology-related equipment, which includes being one of the directions for fiscal policy investment, having numerous thematic catalysts, and benefiting from the Zhugelra cycle. Risk warning: Accelerated confirmation of a "hard landing" in the US economy beyond market expectations; domestic export slowdown exceeds expectations; historical experience has limitations.