Zhongtai: Spring market starts, focus on small-cap growth and entrepreneurship directions when allocating sectors.

Zhongtai released a research report stating that the characteristics of the current market spring market have gradually emerged, and in terms of funds, leveraged funds have become active again since mid-to-late December. This week, the margin trading buying volume as a percentage of the total A-shares has once again fluctuated upwards. The trading volume of small-cap growth sectors has been steadily increasing since the end of December, with funds starting to gather in these sectors. In addition, the ETF funds of theme/industry indexes, which experienced continuous net outflows for nearly a month, turned positive this week, showing a clear trend of net inflows. The focus should be on prioritizing small-cap growth and entrepreneurship sectors, capturing thematic elasticity: In the first quarter, the market style overall may still lean towards small-cap and growth stocks. Zhongtai recommends paying attention to small-cap entrepreneurial sectors. Additionally, the strategy should prioritize short-term trend tracking: respecting the market's strong direction, participating in trend-following thematic sectors with gathered funds, and switching timely. Zhongtai suggests focusing on thematic directions that have had a significant pullback, improved chip structure, and signs of recent fund re-gathering, such as pharmaceuticals, Siasun Robot&Automation, and gaming. Grasping the "long bull" context, there is still room for securities and insurance, while financial technology has greater flexibility: Securities and financial technology sectors directly benefit from the market's shift towards higher trading volumes and the resurgence of leveraged funds. The profit model of financial technology companies listed on the market is more sensitive to trading volume, active account numbers, and market volatility, with increased market sentiment bringing greater performance flexibility. Zhongtai's main points are as follows: 1. The context of the current market rally: Long-term funds support, insurance funds lead the way. In late 2025, A-shares experienced a rebound after a correction, initiating a new round of upward trends, mainly driven by several factors: 1) The cumulative net inflow of A500ETF in December was close to 100 billion RMB, providing support to the market. 2) During the holidays, the Hang Seng Technology sector surged, boosting market confidence; 3) Individual insurance data during the New Year period showed good performance, with the insurance sector leading a market outbreak on the first day. With the index rising and trading volume increasing, the bullish sentiment may continue to spread or attract incremental funds. This round of "spring restlessness" may have already started early. 2. What are the characteristics of the "spring restlessness" market? The "spring restlessness" is a prominent seasonal feature of the A-share market, usually occurring in a phase of high certainty seasonal rally from the end of each year to the first quarter of the next year. 1) At the beginning of the year, as China's macro policies are intensively released, funds often start building positions in potential beneficiary areas, creating thematic investment hotspots. 2) The seasonal inflow of funds at the beginning of the year creates necessary liquidity conditions for the market. 3) The "vacuum period" of financial report data means that the market cannot refute expectations in the short term, and market sentiment is prone to continuous fermentation in optimistic expectations. Reviewing the annual main bullish trends during the "spring restlessness" phase from 2016 to 2025, it is found that the start time of the market trend mostly concentrates in late January, with the end time generally around mid-to-late March around the two sessions, lasting for about 30 trading days. Looking at the index's performance during these times, the main bullish waves of the "spring restlessness" rally have increased by about 15%. In terms of style, the market tends to lean towards small-cap, growth sectors during the "spring restlessness" period, with a preference for entrepreneurial sectors. In terms of industries, high valuation, high growth expectations (TMT), and industries catalyzed by policies or industry expectations (machinery, new energy, non-ferrous metals) perform well. 3. Outlook for 2026: How might this year's "spring restlessness" unfold? The first quarter and even longer may show characteristics of market bottom rising and continuous activation of the main line: From a macro perspective, China's economy may still be in a weak recovery channel in 2026. Under the policy framework of "stable growth" and "strong technology", sectors related to technology are more likely to receive sustained institutional support, fiscal resources, and capital market policies. At the industry level, the transformation of old and new kinetic energy has begun to show results, with a group of high-tech listed companies gradually moving from "policy-driven" to "performance verification", providing necessary conditions for long-term capital participation and continuous pricing. With the trend of capital inflow and increasing confidence in 2026, the expectation game and value discovery process in the technology sector may become one of the long-term focuses of the capital market. In terms of funds, long-term funds support the market, and under policy promotion, the market may maintain active trading. Long-term funds entering the market, resident funds entering the market, and the increasing support from capital market policies provide necessary liquidity conditions for the market, with overall downside risks being manageable. With several factors working together, the market may find it difficult to show a unilateral bull market, but structural opportunities are expected to remain active, with the overall market showing characteristics of being mainly driven by themes and funds rotating quickly among different main industries. The market's "theme rotation" pattern may continue. The characteristics of the current market spring market have gradually emerged: in terms of funds, leveraged funds have become active again since mid-to-late December. This week, the margin trading buying volume as a percentage of the total A-shares has once again fluctuated upwards. The trading volume of small-cap growth sectors has been steadily increasing since the end of December, with funds starting to gather in these sectors. In addition, the ETF funds of theme/industry indexes, which experienced continuous net outflows for nearly a month, turned positive this week, showing a clear trend of net inflows. 4. Investment advice (A) Prioritize the allocation of small-cap growth and entrepreneurial sectors, capturing thematic elasticity: In the first quarter, the overall market style may still lean towards small-cap and growth. It is recommended to focus on small-cap entrepreneurial sectors. (B) The strategy should prioritize short-term trend tracking: respecting the market's strong direction, participating in trend-following thematic sectors with gathered funds, and switching timely. It is recommended to focus on thematic directions that have had a significant pullback, improved chip structure, and signs of recent fund re-gathering, such as pharmaceuticals, Siasun Robot&Automation, and gaming. (C) Grasp the context of the "long bull": Securities and insurance still have room to grow, while financial technology has greater flexibility: Securities and financial technology sectors directly benefit from the market's shift towards higher trading volumes and the resurgence of leveraged funds. The profit model of financial technology companies listed on the market is more sensitive to trading volume, active account numbers, and market volatility, with increased market sentiment bringing greater performance flexibility. Risk warning: Downside risks from macroeconomic downturns beyond expectations, changes in market conditions, past experience becoming ineffective, and risks from market liquidity shocks.