EB SECURITIES 2026 Strategic Outlook: The third year of the bull market, time is more important than space

EB Securities released a research report stating that the current market position is expected to be the starting point of a long-term bull market. The gradual improvement of fundamentals and industry highlights are still the foundation of the long-term bull market. The inflow of resident funds and policy support in the beginning year of the "Fifteenth Five-Year Plan" will determine the slope and pace of the market. Compared to the overall bull market of previous years, the current index still has a considerable room for upside, but under the government's guidance towards a "slow bull," the duration of the bull market may be more important than the rate of increase. The core points are as follows: Basis of the long-term bull market This round of bull market is still worth looking forward to in terms of both time and space. The sustainability of a bull market requires not only an improvement in liquidity, but historically, the longer the time horizon, the higher the correlation between the market and fundamentals. Therefore, when looking ahead to the possibility of a long-term bull market, the steady improvement of fundamentals is still the foundation, with policies often providing turning points in expected improvements, and funds determining the slope and pace. At this stage of the bull market, it is increasingly important to focus on the realization of fundamental expectations. Overall stability of earnings, focus on structural highlights Looking ahead to 2026, price changes may become a major driving factor for earnings. After a significant boost from policy measures, the domestic economy may re-enter a period of stable operation in 2026, with the impact of prices on earnings potentially becoming more pronounced. It is expected that A-share earnings will gradually recover in 2026, with non-financial A-share growth rates recovering to around 10%, while there may be more highlights in the earnings structure. Focus on resident funds and suggestions for the "Fifteenth Five-Year" Plan Medium-risk appetite funds may be the main incremental funding for the next stage. Residents are the most important source of funds in the A-share market, and so far in this bull market, the situation of resident funds entering the market is similar to that of 2015. High-risk appetite funds have quickly entered the market, but looking ahead, medium-risk appetite funds may be the important marginal increment in the next stage, such as public funds, ETF funds, etc. Focus on the "Fifteenth Five-Year" Plan Resonance of policies in the beginning year. In terms of policies, the recommendations of the "Fifteenth Five-Year" Plan provide an important policy foundation for the economic and industrial development of the next five years. In the beginning year of the five-year plan, the market usually performs well, and the structure will also be consistent with the direction of policy increments. In addition, it is expected that financial policies will still generally be in a loosening cycle. In the third year of the bull market, time is more important than space The current market position is expected to be the starting point of a long-term bull market. The gradual improvement of fundamentals and industry highlights are still the foundation of the long-term bull market. The inflow of resident funds and policy support in the beginning year of the "Fifteenth Five-Year" Plan will determine the slope and pace of the market. Compared to previous comprehensive bull markets, the current index still has a considerable room for upside, but under the government's guidance towards a "slow bull," the duration of the bull market may be more important than the rate of increase. Major themes and potential shifts TMT and advanced manufacturing sectors may still be the main themes of the bull market in 2026. We make forecasts for the performance of various sectors next year based on three dimensions: fundamentals, funds, and valuation. Overall, the TMT and advanced manufacturing sectors may still be the main themes of the bull market in 2026, with TMT and advanced manufacturing possibly currently in the second stage of the bull market trend, with still significant room for improvement in the future. Cyclicals and financials may be potential areas of phase change. Although each bull market has relatively certain key directions, there are also quarterly style shifts. In the process of transition, the previous key themes often face pressure. The direction of style change may be related to both "high switching to low" and economic expectations, with cyclicals and financials possibly being potential directions for change in the future. Risk warning: Economic growth falls short of expectations, leading to poor performance in the A-share market; fluctuations in US-China relations suppress market risk appetite; sustained decline in market sentiment leads to continuous outflow of funds.