Zhongtai: Focus on "external demand cycle + AI industry chain" in February and pay attention to the marginal changes brought about by the fight against internal exhaustion.

Zhongtai released a research report stating that, based on historical patterns, after experiencing two consecutive years of valuation recovery, A-shares in the third year often find it difficult to sustain high valuations, and market momentum will rely more on earnings realization. In this context, the allocation strategy should focus more on the visibility of performance and improvements in supply and demand structure. (1) External demand cycle: On one hand, the global manufacturing recovery is expected to support global pricing of resources such as copper and oil; on the other hand, the recovery of overseas traditional industries presents opportunities for China's globally competitive manufacturing sector to expand, including segments such as power equipment, motorcycles, and engineering machinery. (2) AI industry chain: Artificial intelligence remains the clearest theme in the industry, but investments should gradually shift from thematic expansion to performance-driven convergence, focusing on certainty brought by shortages in key areas. The current global supply-demand imbalance in which the US lacks electricity, China lacks chips, and there is a global shortage of storage has not been reversed, and the computational power chain and complementary energy storage sectors still have strong potential for earnings realization. (3) Clues against internal competition: Some industries, after a long period of supply clearing and competition optimization, are expected to see price elasticity when demand margins improve, making the recovery in sectors such as chemicals under supply constraints worthy of attention. In January, A-shares exhibited typical seasonal excitement characteristics, with overall performance showing highs followed by stability and structural differentiation. As of January 28th, major indexes all recorded positive returns, with the Sci-Tech Innovation 50 index showing outstanding growth of 15.67%, the Shanghai Composite Index up by 4.60%, the Growth Enterprise Board index up by 3.76%, and the CSI 300 index up by 1.90%. In terms of momentum, the first half of the month continued the trend of strong upward movement, while the second half of the month entered a period of high-level volatility due to regulatory intervention and overseas disturbances, resulting in a noticeable slowdown in index growth rates. Incremental funds are driving the spring excitement, with risk preferences constraining the speed of index uptrend. (1) At the beginning of the year, incremental funds rapidly flowed in, leading to loose market liquidity as the main reason for the index's upward trend. In January, the average daily turnover of A-shares reached 3.04 trillion yuan, an increase of 1.16 trillion yuan over the previous month, with margin balances rising to 2.72 trillion yuan, an increase of 0.18 trillion yuan compared to December, placing it in the 99.4th percentile over the past 3 years. Leverage levels also rose simultaneously, with the average guarantee ratio in the market reaching 292.83% as of January 27th, a 14.57% increase month-on-month. (2) Regulatory cooling combined with outflows from broad-based ETFs led to market turbulence, slowing the speed of the index climb. On January 14th, regulators raised the minimum margin requirement for financing from 80% to 100%. At the same time, several broad-based ETFs in which the State Administration of Foreign Exchange held large positions experienced significant net redemptions. The China Securities Regulatory Commission emphasized "resolutely preventing market extremes during its 2026 system work conference on January 15th, sending a policy signal to curb market overheating. Market turbulence resulted in a slowdown in the index climb. (3) Multiple overseas disturbances suppressed global risk appetite, which also affected A-shares. In late January, geopolitical tensions around Greenland between the US and Europe intensified, sparking global risk aversion. At the same time, long-term bond yields in Japan rose significantly, reflecting concerns over its sovereign credit risk, amplifying global liquidity fluctuations. Additionally, strong US consumer and industrial production data in December, along with fluctuating expectations for the US Federal Reserve's interest rate cuts, further dampened risk appetite. Within the technology asset class, thematic and cyclical investments showed differentiation, with cyclical assets benefiting from the spillover effects of technology prosperity, supply side optimization, and overseas disturbances, leading to a strong market continuation. (1) Within the technology asset class, thematic investments performed better in the first half of the month, while cyclical investments outperformed in the second half. Thematic investments, such as commercial aerospace, AI applications, brain-machine interfaces, etc., attracted leveraged funds due to frequent industrial catalysts, but cooled off slightly after the increase in margin requirements. Cyclical investments, such as semiconductors, storage, power equipment, etc., attracted funds due to their profit certainty revealed during the earnings disclosure window. The spring excitement shifted from high-elasticity themes to profit-certainty themes. (2) In the cyclical asset class, non-ferrous metals, basic chemicals, and petroleum/petrochemicals performed well. The strong performance of cyclical assets is driven by three factors: first, the spillover of technology upstream prosperity, with high-end manufacturing demand driving growth in basic metals such as copper, aluminum, lithium, and specialized equipment orders; second, proactive contraction of supply on the supply side under the anti-internal competition scenario, with the ongoing clearance of excess industry capacity leading to improved profit expectations; and third, external factors such as the fluctuation in expectations of interest rate cuts by the US Federal Reserve and geopolitical risk escalations driving the rise. Looking ahead, the index is expected to fluctuate, with market trends showing structural characteristics. The current momentum of the index is constrained by odds, and it is expected to maintain a pattern of volatility. As of January 28th, the median PE of the full A-shares was at the 98.9th percentile over the past 3 years, the median PB was at the 99.1st percentile over the past 3 years, and the risk premium of the Wenhua full A was at the 0.2nd percentile over the past 3 years. Several odds indicators indicate that there is limited upside potential for the index at the moment. The structural market trend is expected to revolve around the core theme of resources + technology + going global, with some low-risk preference stage dividend assets possibly taking a leading position. This judgment is based on the lack of fundamental shift in macro trends: the weak and stable trend in the domestic economy continues, with industrial policy and technological advancements continuing to tilt towards the field of technological innovation. From the perspective of valuation distribution, although the rotation between industries is accelerating, the degree of valuation differentiation among sectors is not extreme, and the conditions for systemic style switching are not yet sufficient, with the market likely to show more structural developments within the main themes and cyclical rotations in specific sectors.