A-share market review | A-shares once again show extreme styles! differentiation continues between large and small-cap stocks, three major reasons exposed

Afternoon narrow fluctuations in the big three indices led to collective declines. As of the close, the Shanghai Composite Index fell by 0.01%, the Shenzhen Component Index fell by 0.64%, and the Growth Enterprise Market Index fell by 0.55%. The market once again demonstrated extreme style during the trading session: companies with high market value mostly rose, while micro-cap stock indices fell by over 3%. According to Securities Times, there are several reasons behind this change: 1. Fund chasing dividends; 2. Small-cap stocks were crowded before, even sparking a debate between hot money and quantification; 3. Concerns and anxiety in the market were triggered by variables such as reduction of holdings, year-end settlements, and advance disclosure of annual reports. Guotai Junan believes that the market may be at a critical period for choosing between large and small-cap styles, and it is necessary to wait for the market to determine its next main direction. In terms of allocation strategy, it is recommended for investors with high turnover rates (daily turnover) to continue to balance their portfolios between large and small caps in the short term (preferably choosing a dumbbell strategy), and then adjust accordingly after the model signals become more clear. For investors with lower turnover rates (monthly turnover), it is advised to continue to overweight large-cap styles in the medium term. In terms of market performance, only a few sectors, such as banking and insurance, showed gains. Stocks like Industrial and Commercial Bank of China, Agricultural Bank Of China, Bank Of China, and China Construction Bank Corporation hit historic highs during the trading session. The concept of robotic dogs continued to be active, with stocks like Shenzhen Sea Star Technology, Zhejiang Jingxing Paper Joint Stock, and ZheJiangJiHua Group hitting their limit up. The concept of large consumption, including retail, rose in the afternoon, with stocks like Zhongbai Holdings Group, Fujian Dongbai, and Xiangpiaopiao Food hitting their limit up. AI glasses and liquid cooling concepts showed strength, with stocks like Zhejiang Tongxing Technology and Skyworth Digital hitting their limit up. On the downside, the digital economy concept saw collective losses, with stocks like CHINA BEST Internet Security and LingNan Eco&Culture-Tourism hitting their limit down. The concept of explosives fell, with stocks like Poly Union Chemical Holding Group and Tibet GaoZheng Explosive hitting their limit down. The AI industry chain was on a downward trend, with stocks like Shenzhen AOTO Electronics and Shanghai CDXJ Digital Technology hitting their limit down. The Byte industry chain also saw collective declines, with stocks like HuiZhou Intelligence Technology Group and Beijing Yuanlong Yato Culture Dissemination hitting their limit down. Concepts such as agriculture, Siasun Robot&Automation industry chain, semiconductors, securities, and internet finance all fell. Mainstream funds favored industries like automotive parts, retail, and insurance, while funds flowed out of industries like securities and semiconductors. Institutional Views: Looking ahead, Chen Guo, Chief Strategist at China Securities Co., Ltd., believes that loose policies are likely to be further eased in the beginning of next year, with expectations of reserve ratio cuts and interest rate cuts, leading to more funds flowing into the A-share market, and the expected continued rally through the New Year. China Securities Co., Ltd.: The expected rally through the New Year will continue, focusing on the subdivided sectors supported by policies Chief Strategist Chen Guo of China Securities Co., Ltd. believes that loose policies are likely to be further eased at the beginning of next year, with reserve ratio cuts and interest rate cuts worth looking forward to. Funds are expected to further flow into the A-share market, and the expected rally through the New Year will continue. Overall, there is a significant rotation in theme investments, so it is advised to focus on subdivided sectors supported by policies, such as AI hardware and consumer upgrades. CICC: Expansion of catering and cultural tourism policies in 2025 expected to bring about demand recovery and inflection point in quantity and price A CICC research report stated that in 2024, hotels and tourism faced overall "quantity stability and price reduction" under a high base in the previous year, while catering, duty-free shops, and personnel services faced quantity and price pressures similar to those seen since 2023. While valuations have slightly rebounded from the bottom due to policy expectations, the valuations for top companies are still relatively low. Looking ahead to 2025, the expansion of catering and cultural tourism policies is expected to bring about demand recovery and inflection points in quantity and price, so it is recommended to focus on industry "infrastructure." Guotai Junan: Expected high-speed growth in the AI ASIC market A research report by Guotai Junan Securities believes that ASIC (Application-Specific Integrated Circuit) designed for specific scenarios have supporting communication interconnections and software ecosystems. Although the computing power of a single ASIC still lags behind the most advanced GPUs, the efficiency of utilizing the computing power of an entire ASIC cluster may be higher than that of comparable GPUs. Additionally, ASICs have clear advantages in terms of price and power consumption, which could lead to wider application in AI inference and training. Expectation of large-scale applications of ASICs will enhance the ROI for cloud providers, and it is also advised to focus on related targets in the customized chip industry chain. AI ASICs have power and cost advantages, and since it is still in the early stages of development, the market size is expected to grow rapidly. Popular Sectors: 1. Banking and insurance stocks were volatile and on the rise Banking and insurance sectors showed strength, with Industrial and Commercial Bank of China, Agricultural Bank Of China, Bank Of China, and China Construction Bank Corporation stocks rising.Hit a record high in the history.Review: On December 17th, the State-owned Assets Supervision and Administration Commission of the State Council issued "Several Opinions on Improving and Strengthening the Market Value Management of Central Enterprises' Listed Companies with State-owned Controlling Stakes". Galaxy Securities research report said that with the further strengthening of the management of central enterprise market value, bank valuations are expected to benefit. 2. Retail and other consumer concepts rose in the afternoon Retail and other consumer concepts rose in the afternoon, with multiple stocks such as Zhongbai Holdings Group, Fujian Dongbai, and Xiangpiaopiao Food hitting the limit up. Review: Guotai Junan research report pointed out that the consumer industry is showing a weak recovery trend in 2024. Looking ahead to 2025, decision-makers are expected to further increase stimulus measures for consumption, such as expanding the scope and scale of the replacement of old products with new products through special national bonds, to help stabilize and revive the consumer market. Focus on three investment themes of high-quality growth, replacement of old products with new products, and supply-demand optimization. 3. Brain-computer interface concept rebounds The brain-computer interface concept rebounded, with Keeson Technology Corporation hitting the limit up. Review: On the news front, the General Office of the Shanghai Municipal People's Government issued the "Shanghai Development Plan for Medical Artificial Intelligence (2025-2027)", mentioning deepening frontier basic research. Focus on research layout in frontier areas such as artificial intelligence cognitive intelligence, reinforcement learning, brain science and brain-computer interfaces, computational biology and other frontier areas of medical research. Encourage cooperation between national laboratories, research institutions, and medical institutions in Shanghai to strive to achieve a number of leading and disruptive theoretical achievements. This article is reprinted from "Tencent Self-Selection Stocks", edited by GMTEight: Jiang Yuanhua.