China Securities Co., Ltd.: Incremental liquidity is expected to drive the A-share market into the new year. AI+ is the main theme for the mid-term industry.

China Securities Co., Ltd. released a research report stating that in the past few months, the bottom of the A-share market has been continuously moving up. From a seasonal perspective, some funds have settled profits at the end of the year to secure gains, leading to subdued trading in the market at the end of the year. Risk appetite decreases during this period, but activity is expected to gradually pick up at the beginning of the new year, with liquidity further improving after the Lunar New Year. Against the backdrop of current policies, there is hope for timely reserve requirement ratio cuts and interest rate reductions in the first quarter of next year. The decline in bond yields will increase the attractiveness of stock valuations, and incremental liquidity is expected to drive the A-share market performance across the New Year period. It is anticipated that the market will continue its trend of trading within a range with an upward bias at the start of next year. Pay attention to potential policy-driven sectors, with AI+ as the medium-term industry focus. Key industries to watch include non-banking finance, electronics, defense, media, machinery, real estate chain, construction, and leisure services. Key themes to focus on include AI+, low-altitude economy, and IPO economy. Historical experience from the past decade shows that after a period of low trading volume at the end of the year, market activity often improves at the beginning of the year. The rally in market sentiment before and after New Year's Day is mainly driven by investors' psychological mindset of "securing gains at the end of the year" and "starting anew at the beginning of the year." Looking at the experience of the A-share market in the past decade, the market tends to be stronger at the beginning of the year and after the Lunar New Year compared to the end of the year and before the Spring Festival, which is related to the seasonal effects of micro liquidity and risk preference. Statistically, during the period from New Year's Day to the Lunar New Year, blue-chip stocks in the A-share market tend to outperform, with the period after the Spring Festival leading up to the Two Sessions historically being the most probable stage for a significant rise in the A-share market as micro liquidity and risk preference are generally favorable, with growth stocks outperforming value stocks and themed activities being active. Recent policy statements indicate that the central bank will implement meaningful reserve requirement ratio cuts and interest rate reductions. Market expectations for their implementation in the first quarter of next year have rapidly increased, and risk-free interest rates have been rapidly declining in the recent period. Further reserve requirement ratio cuts and interest rate reductions will release more liquidity and, combined with expectations for fiscal policy measures, will help boost the overall valuation levels of the A-share market and strengthen the relative cost-effectiveness of stocks compared to bonds. Considering the current industrial trends and policy support directions, it is worthwhile to pay attention to the direction of technological growth. Key focus areas include policy directions and the AI+ industrial theme. The widespread use and rapid growth in the adoption of the DouBao large model in various scenarios such as information processing, customer service, sales, and AI tools demonstrate a significant increase in its commercial potential. DeepSeek-V3 has achieved outstanding performance at a low training cost and operational expense. Favorable policies for the low-altitude economy are emerging frequently, with the National Development and Reform Commission officially establishing a low-altitude economy development department, leading to accelerated industry development. Rapid emergence of new defense equipment is expected, leading to a significantly increased focus on the defense industry sector. With multiple thematic catalysts appearing frequently, it is recommended to seize the opportunity of rotational theme strategies at the beginning of the year.