Guotai Junan: Stock market stabilizing and holding shares during the holiday, optimistic about rebound opportunity before Spring Festival and Two Sessions.

Guotai Junan released a research report stating that the stock market has stabilized, suggesting holding stocks during the holidays, and expecting a rebound window from the Spring Festival to the Two Sessions. The focus of the Spring Festival to Two Sessions rebound is on technology and small and medium-sized companies, while Hong Kong stocks present an opportunity for allocation. With the resumption of liquidity after the Spring Festival and investors' expectations for the Two Sessions policies (focusing on industrial policies), a window for stock market rebound during the Spring Festival and Two Sessions is expected to be formed. However, it should be noted that as economic policies have already been widely anticipated and there is increased uncertainty compared to the past three months, the height of the index rebound is not the focus. The focus should be on grasping the structure. Key points from Guotai Junan: Overall assessment: The stock market has stabilized, holding stocks during the holidays, and expecting a rebound window from the Spring Festival to the Two Sessions. Guotai Junan clearly predicted on January 5 that "the stock market is expected to stabilize before the Chinese New Year", with the Shanghai Composite low point before the Spring Festival above 3100, and the focus of the stabilization rebound on technology and small and medium-sized growth, as well as expanding to Hong Kong stocks. The bank's assessment is basically consistent with the actual market performance, as the stock market has begun to rebound from recent lows. The formation and stabilization before the Spring Festival confirmed two important variables: 1) The stock market has already priced in unfavorable factors such as earnings risks and residents' cash withdrawal demands before the Spring Festival; 2) Market risk preference has stabilized. Therefore, the significance of the call between the leaders of China and the United States lies not in changing investors' basic assumptions about great power rivalry, but in clarifying the stabilization of risk preference during a certain period, particularly from the Spring Festival to the Two Sessions, forming a trading window. Additionally, with the resumption of liquidity after the Spring Festival and investors' expectations for Two Sessions policies (with a focus on industrial policies), a window for stock market rebound from the Spring Festival to the Two Sessions is expected to be formed. However, it should be noted that since economic policies have already been widely anticipated and there is increased uncertainty compared to the past three months, the height of the index rebound is not the focus. The focus should be on grasping the structure. Seizing the small and medium-sized growth window: focus on technology support policies and industrial breakthroughs. 1) From an experiential understanding and calendar effects, the market enters the expectation stage of the Two Sessions policies after the Spring Festival, coupled with a relatively loose liquidity environment, the small and medium growth strategy will once again take the lead. Historically, the Spring Festival has usually been a key point for the market style to switch from large cap to small and medium cap, with the CSI 2000 index showing significant relative returns compared to the Shanghai and Shenzhen 300. 2) From the Central Economic Work Conference and the current trend of provincial Two Sessions, the policy focus in 2025 is on using technology and industrial momentum to drive new growth. During the local and national Two Sessions period, the technology industry is expected to benefit from policy themes. Additionally, on January 20, the Shanghai Science and Technology Innovation Board Composite Index will be officially released, with the Science and Technology Innovation Board Composite Index ETF set to be issued in February, enriching the toolbox for liquidity support for innovative companies. Industry comparison: The focus of the Spring Festival to Two Sessions rebound is on technology and small and medium-sized companies, while Hong Kong stocks present an opportunity for allocation. The stabilization of risk preferences and investors' expectations for Two Sessions industrial/domestic demand policies are expected to drive a rebound in technology growth, domestic consumption, and small and medium-sized companies. 1) Expectations of loose macro liquidity + state-owned capital technology investment/merger and acquisition restructuring policy support + Science and Technology Innovation Board investment tools expansion + the catalysis of Sino-US technology competition, recommending AI applications/electronics/new energy/mechanical equipment, etc. 2) Central government's reinforcement in expanding the "two new" policy, frequent mentions of boosting consumption during local Two Sessions, continuous efforts in expanding domestic demand policies. Recommended sectors include leisure food/beauty care/kitchen appliances, etc. 3) Hong Kong stocks are more fully assessing unfavorable factors compared to A-shares, and the proportion of cash/total market value of quality companies continues to rise. The bank believes that the investment value of Hong Kong stocks will gradually become clear, and recommends starting to increase exposure to Hong Kong's internet sector. Theme recommendations: 1) Personal intelligent: Multiple local Two Sessions focus on the layout of humanoid Siasun Robot & Automation industry, Beijing will host the Siasun Robot & Automation "one meeting one competition", bullish on core components such as screws/dexterous hands. 2) AI new infrastructure: Shanghai and other places have released intensive computing investment plans, the capital expenditure of China's intelligent calculation center is expected to accelerate, bullish on servers/power supply/UPS/liquid cooling. 3) Commercial spaceflight: Beijing has proposed to accelerate the construction of commercial satellite constellations, the demand for satellite launches is increasing, benefiting the satellite manufacturing/launch service/radar communication industry chain. 4) Low-altitude economy: Guangdong has proposed to build a "1+3+N" low-altitude economic development platform and application system, bullish on aircraft manufacturing/core components/air traffic control/general aviation operations. Risk warning: Overseas economic recession exceeds expectations, global geopolitical uncertainties.