EB SECURITIES: It is expected that the A-shares in February will swing between growth and balance, paying attention to flexible Hong Kong stocks.

EB SECURITIES released a research report stating that for this year's spring market, policy may still be the main factor determining the industry's main line, with a focus on consumption and technology growth. In the A-share market, the current valuation is near the average level since 2010, and with active policy support, long-term funds and incremental funds from previous profits are expected to accelerate into the market, further boosting the A-share market valuation. In terms of market style, it is expected that February may swing between growth and balance. In the Hong Kong market, the implementation of tariff policies, in line with market expectations, will have a diminishing impact on Chinese assets, with continued improvement in economic data and strong financial reports expected to support the Hong Kong market in the future. EB SECURITIES' main points are as follows: Core issue one: Focus on the post-Spring Festival holiday effect. From 2010 to 2024, the probability of the CSI All A-share Index rising in the 20 trading days before the Spring Festival is about 46.7%, while the probability of rising in the 20 trading days after the Spring Festival is 73.3%, with the majority of broad-based indices showing significantly higher average gains or losses in the 20 trading days after the Spring Festival compared to before the Spring Festival. The performance of the A-share market in January is relatively average, which is somewhat consistent with historical patterns. The market performance after the Spring Festival is more anticipated. Core issue two: Focus on the gradual validation of logic. The future market will gradually enter the stage of policy implementation and data validation. Based on the disclosed annual performance forecasts, A-share annual performance for 2024 may be under pressure; February will release data on January prices, finance, etc., with financial data expected to continue to improve; policies are still being pushed actively, with reference to the state of the Central Economic Work Conference in 2024 and the Shanghai GDP growth rate target setting, the GDP growth rate target for the whole country in 2025 is likely to still be set at around 5%. Core issue three: Which industries to focus on for this year's spring market? By reviewing the industries that have performed well in previous spring markets, it is apparent that policy is a major influencing factor. For this year's spring market, policy is likely to still be the main factor determining the industry's main line, with a focus on consumption and technology growth. In the consumption sector, the focus is on trade-ins for new products and service consumption, such as automobiles, household appliances, consumer electronics, social services, retail, etc., while in the technology growth sector, the focus is on industries such as TMT, machinery and electrical equipment, and power equipment that reflect policy in the capital market. A-share market: Embrace the spring market. Historically, the A-share market has shown good performance in February and in the period after the Spring Festival. This year, the first trading day after the Spring Festival falls on February 5th. Therefore, based on the calendar effect, the performance of the A-share market after the Spring Festival is worth looking forward to. In addition, the current valuation of the A-share market is near the average level since 2010, and with active policy support, long-term funds and incremental funds from previous profits are expected to flow into the market, potentially further boosting the valuation of the A-share market. In terms of market style, it is expected that February may swing between growth and balance, with a focus on growth and independently prosperous industries such as software development (AI), industrial metals (copper/electrolytic aluminum), and automation equipment (human Siasun Robot & Automation), as well as balanced styles that focus on medical services (CXO), liquor, and large state-owned banks. Hong Kong market: A resilient choice. In January, various Hong Kong index valuations fluctuated lower, offering a higher cost-effectiveness ratio. As of January 27th, the Hang Seng Index PE-TTM valuation was 9.2 times, which is at the 27th percentile of historical data since 2010, while the Hang Seng Technology Index PE-TTM valuation was 20.9, located at the 12.9% percentile since 2010. The implementation of tariff policies, in line with market expectations, will gradually diminish the impact on Chinese assets. Continued improvement in economic data and strong financial reports are expected to support the future performance of the Hong Kong market. Risk warning: Historical patterns may cease to apply; policy implementation may be slower than expected; market sentiment may significantly decrease; fluctuations in US-China relations may suppress market risk appetite.