Ping An Securities: The A-share market still has the ability to rise under the dual drive of policy and fundamentals.

Ping An Securities has released a research report stating that looking ahead to March, high-frequency and leading economic indicators show a seasonal rebound in production, and the repair of economic fundamentals continues. Going forward, the A-share market has entered a period of intense policy observation and performance disclosure after the "two sessions", and policy signals will become clearer, supporting economic growth and boosting market confidence. The domestic tech innovation force is also rising, and the market still has the potential to rise under the dual driving factors of policy and fundamentals. February is a period where some macroeconomic data is missing, and the fundamentals continue to show signs of repair. Firstly, January saw a good start in social financing, with a significant improvement in corporate credit demand; secondly, there was a slight rebound in prices in January, but they are still in a weak range; thirdly, during the Spring Festival, consumption was unevenly heated, with high popularity in culture and tourism, while white spirits and automobiles performed averagely. In terms of policies, since February, the central government has focused on private economy, rural revitalization, energy security, foreign investment, and expanding domestic demand, placing more emphasis on boosting consumption. Regarding domestic assets, the A-share market has evolved under the influence of DeepSeek towards the dominant growth style of the spring market, leading to trends such as "AI+" trading and pro-cyclical trading during the two sessions; the bond market has been affected by factors such as increased supply of interest rate bonds, improved risk appetite, good start in credit demand, and maturity of interbank CDs, leading to a slight tightening of market funds, driving up treasury yield curves; the RMB exchange rate has been fluctuating in a narrow range, showing a slight weakening trend, maintaining a high correlation with the US dollar trend. The trading logic of overseas assets shifted from Trump transactions to a soft landing narrative in February. The overall trend saw US stocks and the US dollar fluctuating at high levels before declining, while US bond yields rose before falling. Specifically, US stocks experienced a significant decline due to NVIDIA's fourth-quarter report and Trump's tariff policy; yields of long and short-term US bonds fell significantly, making the curve flatten, reflecting market concerns about economic downturn; the US dollar index strengthened again at the end of the month due to the impact of the tariff policy. In addition, Hong Kong stocks benefited from Deepseek, causing a revaluation of Chinese tech assets, private enterprise forums, Alibaba's earnings exceeding expectations, resulting in a substantial increase. Looking ahead to March, high-frequency and leading economic indicators show a seasonal rebound in production, with the economic fundamentals continuing to repair. Firstly, industrial high-frequency data shows a general recovery in production, and the PMI data for February shows that the manufacturing business climate has returned to above the breakeven point, with improvements in supply and demand; secondly, high-frequency data on prices indicate a slight rebound in producer prices, with expectations of a narrowing of the decline in PPI; thirdly, real estate high-frequency data shows that the transactions in 30 large and medium-sized cities are still below historical averages, with stable housing price data in January, first-tier cities rising month-on-month while second and third-tier cities falling slightly. In general, the production in February 2025 has warmed up compared to the post-holiday resumption, with a rise in the manufacturing business climate level; however, indicators such as prices and real estate sales show that the fundamentals are still to be verified. Looking ahead, the A-share market has entered a period of intense policy observation and performance disclosure after the "two sessions", and policy signals will become clearer, supporting economic growth and boosting market confidence, with domestic tech innovation rising further at the micro level. The market still has the potential to rise under the dual driving forces of policy and fundamentals. The bond market will enter a phase of observational turning point in mid to late March, as most funds have fallen after the "two sessions", focusing on signals such as liquidity stabilization by the central bank, equity decline, weak fundamentals, etc. The RMB exchange rate may remain in a narrow range in the short term, influenced by China's economic recovery, expectations of a wide fiscal policy for 2025, and the US-China interest rate difference. Looking ahead to March, it is expected that the US economic fundamentals will still have resilience, but there are increasing headwinds. Firstly, the labor market continues to cool slowly, and the drag from government layoffs may gradually become evident; secondly, the increase in wage growth and rising inflation expectations may restrict downward inflation. In this context, combined with the Fed meeting minutes showing no rush to cut interest rates, there is a high probability that the Fed will maintain interest rates unchanged in March. Meanwhile, Trump's policies and geopolitical situations will continue to disrupt the market. Firstly, Trump's tariff policy has expanded in terms of countries, products, and types, and its inflationary effects and hindrances to growth will continue to affect the market, with potential fluctuations in future tariff policies; secondly, Trump is trying to quickly push forward negotiations between Russia and Ukraine, but the process is fraught with twists and turns, with related disturbances expected to continue. Based on this, US stocks may continue to fluctuate downward, with downward revisions in 2025 earnings expectations, increased uncertainty in tariff policies, and relatively high market valuations, it is expected that US stocks will face pressure. The downward space for US bond yields is limited mainly because the rebound in US bond rates during this round has been sufficient, and the US economy's fundamental resilience is still present, leading to fluctuations in the range of 4.2%-4.6%. After a substantial short-term increase in Hong Kong stocks, the global valuation advantage of Hong Kong tech stocks remains, with a focus on catalysts in the tech sector, signals from the two sessions' policies, and Trump's policy disruptions, to seize structural opportunities.