Zhongtai: How do you view the continuous increase in the market this week?

Zhongtai released a research report stating that the continuous rise in the market this week is mostly due to a phased recovery of risk preference driven by the cyclical sector. Approaching the end of the year, both domestic and international policies and news were relatively calm this week, lacking new positive factors directly impacting the market. The driving force behind the market this week mainly came from changes in the internal market structure. Looking forward, there is still overall upward potential in the market before the Spring Festival, and there are still opportunities to buy on the dips in the short term. Zhongtai's main points are as follows: Index hits new highs while individual stocks are differentiated, entering a high-level structural rebalancing phase. This week, the A-share market continued to be strong at the index level. In terms of major index performances, the WIND Full-A, CSI 300, and SSE 2000 indexes rose by 2.78%, 1.95%, and 3.06% respectively this week. In terms of trading volume, the daily average turnover of the WIND Full-A increased from 1.76 trillion yuan last week to gradually exceed 1.97 trillion yuan, breaking through the 2 trillion mark on Friday. In terms of individual stocks, the percentage of WIND Full-A stocks rising this week was approximately 52.20%, similar to last week. Overall, the upward trend in the index has been further confirmed, but the way in which it is increasing has changed. The continuous rise in the market this week is mostly due to a phased recovery of risk preference driven by the cyclical sector. Approaching the end of the year, both domestic and international policies and news were relatively calm this week, lacking new positive factors directly impacting the market. The driving force behind the market this week mainly came from changes in the internal market structure. From a market perspective, this week's index rise was mainly driven by cyclical sectors, especially non-ferrous metals. With significant increases in industrial metal commodities prices, cyclically related industries and resource-related stocks saw simultaneous increases in prices. In terms of fund flows and trading characteristics, signs of overall risk preference recovery are more evident. From an external environment perspective, the RMB exchange rate saw a phased appreciation this week, coupled with improved expectations of overseas liquidity, boosting expectations of foreign capital inflows into the A-share market and providing external support for this round of risk preference recovery to some extent. Looking ahead, there is still overall upward potential in the market before the Spring Festival, and there are still opportunities to buy on the dips in the short term. At this stage, the main risk factors restricting the market have weakened significantly compared to earlier periods, and risk preference is expected to remain at a relatively high level. From an external environment perspective, concerns about the previous market tightening global liquidity expectations and the AI sector's correction of overvalued US stocks have eased. From a domestic perspective, with Spring Festival falling later this year and the two sessions being held shortly after the Spring Festival, optimistic expectations for consumption policies are in an "unsubstantiated" period before the two sessions, which is beneficial for maintaining an overall high level of risk preference. However, it should be emphasized that the current market more conforms to the characteristics of "preparing for a market rally before the Spring Festival after bottom consolidation" rather than the formal start of a major uptrend. Currently, funds in the market are more likely to adopt a "buy on the dips, switch structures" approach, rather than trend-based heavy buying at high levels. This means that the short-term market movement is more likely to evolve in a gradual manner in a "gradual upward adjustment in volatility, continuous internal structural adjustment" way, rather than rapidly rising and forming a unilateral, sustained profit-making effect. Investment advice: From a sector allocation perspective, taking into account the characteristics of capital inflows over the past two months and focusing on the thematic-driven trend of the spring market in the coming weeks, attention can be placed on the following directions. 1) The technology theme remains the most resilient mainline direction in the spring market, focusing on sectors such as Siasun Robot & Automation, commercial aerospace, and nuclear power. 2) Overseas computing power and semiconductor-related sectors still have continuity in the mid-term logic in the global industrial chain. For institutional investors, it is advisable to continue to allocate with a mid-term holding strategy. 3) The non-banking financial sector has certain allocation value at this stage. 4) In the consumption sector, it is more suitable to grasp thematic trading opportunities. With the gradual reduction in subsidies for new energy vehicles, the direction of policy support may tilt more towards service consumption and aging-related areas. Attention can be focused on areas such as sports consumption (subsidy models may tilt towards regional events, league system strengthening), medical equipment, and traditional Chinese medicine. Risk warning: Global liquidity tightening beyond expectations, complexity of market game beyond expectations, complexity of policy changes beyond expectations, etc.