Two Sessions Set New Course Fund Managers Adjust Investment Roadmap

As the National Two Sessions convene, the draft outline of the 15th Five‑Year Plan and the Government Work Report have become focal points for investors, offering a clear policy blueprint and signaling a wide range of investment opportunities. Multiple fund houses interviewed view emerging industries such as biopharmaceuticals, new infrastructure centered on computing‑power and electricity coordination, and the large domestic consumer services market as areas rich in opportunity; with policy expectations stabilizing and structural transformation accelerating, the A‑share market may enter a new phase driven by technological innovation and domestic demand recovery.

Biopharmaceuticals Have Been Elevated To An Emerging Pillar Industry - The 2026 Government Work Report places “accelerating the cultivation and expansion of new growth drivers” among its key tasks and provides specific guidance on emerging and future industries. The report calls for encouraging central and state‑owned enterprises to lead in opening application scenarios and building new pillar industries such as integrated circuits, aerospace, biopharmaceuticals, and the low‑altitude economy, while establishing mechanisms to increase investment and share risk for future industries including future energy, quantum technology, embodied intelligence, brain‑computer interfaces, and 6G. Compared with prior years, biopharmaceuticals were newly listed among emerging pillar industries, brain‑computer interfaces were added to future industries, and future energy was elevated in priority.

Policy support produced an immediate market response on March 6, when the biopharmaceutical sector rallied: the CSI Hong Kong Innovative Drug Index rebounded 4.24% in a single session, with Yaojie Ankang surging 43.53% and Rongchang Biopharma rising 10.92%. The Wind Brain‑Computer Interface Theme Index advanced 1.76%, and future energy subsectors such as nuclear fusion, space photovoltaics, and energy storage also strengthened, with Seagull Co., China Energy Engineering, and Taiga Co. among stocks hitting daily limits. Liu Jun, Deputy General Manager and Director of Index Investment at Huatai‑PineBridge, observed that the Government Work Report’s inclusion of biopharmaceuticals as an emerging pillar industry provides clear top‑level design; combined with multiple new drug approvals and an accelerating commercialization cycle, the sector benefits from both policy tailwinds and improving fundamentals, creating conditions for a potential recovery given prior valuation weakness and renewed capital inflows.

Guotai Fund similarly noted that the report’s explicit designation of biopharmaceuticals as an emerging pillar industry, together with measures to promote high‑quality development of innovative drugs, optimize centralized procurement and price management, and strengthen commercial health insurance support for innovative medicines, helps alleviate concerns about profitability and payment. Prior liquidity shocks from global geopolitical tensions left A/H valuations relatively depressed, and active equity funds’ holdings in the pharmaceutical sector fell to a low in Q4 2025, contributing to selling pressure. As sentiment normalizes, the biopharmaceutical sector’s sensitivity to positive marginal changes may increase, offering a higher margin of safety and an attractive allocation window for a potential trough rebound.

Liu Jie, an index investment fund manager at GF Fund, added that recent adjustments in Hong Kong innovative drug stocks reflected a confluence of rising geopolitical risk premia, volatile Fed rate‑cut expectations tightening liquidity marginally, and profit‑taking. He emphasized that the sector’s core logic remains anchored in 2026 industry earnings inflection, explosive growth of domestic new drugs going overseas, and index valuations at historically low percentiles; upcoming clinical data readouts and new rounds of medical insurance negotiations from March to April, along with annual conferences such as ASCO and ESMO, present event catalysts worth monitoring.

Computing‑Power And Electricity Coordination Confirmed As New Infrastructure
Beyond emerging and future industries, the Government Work Report devotes substantial attention to building a new intelligent economic form centered on “AI+” industrialization. On the hardware side, it proposes implementing ultra‑large intelligent computing clusters and computing‑power and electricity coordination projects as new infrastructure; on the application side, it calls for scaled deployment of intelligent terminals and agents to cultivate “intelligent‑native new business formats”; and on data, it emphasizes improving foundational institutions for data as an economic factor and building high‑quality datasets. Tianhong Fund interprets the report’s deepening of “AI+” as a signal that future economic architecture will be built around AI, tightly binding data, compute and power into a full‑chain intelligent economy.

Notably, “computing‑power and electricity coordination” was written into the Government Work Report for the first time and explicitly listed as new infrastructure, drawing market attention. Chen Changsheng, Deputy Director of the State Council Research Office and a member of the report drafting team, highlighted at a press briefing that leveraging the State Grid system’s advantages to build ultra‑large intelligent computing clusters and computing‑power and electricity coordination infrastructure is a priority. Recent strength in power and grid equipment sectors reflects this emphasis: the Guozheng Green Power Index and the CSI Grid Equipment Index have risen 13.54% and 40.51% year‑to‑date respectively, with the CSI Grid Equipment Index reaching new highs on March 6.

Cao Xuchen, Fund Manager of the HuaBao Power ETF, noted that the power sector’s recent outperformance signals both an accelerating AI transformation of China’s IDC data center industry and an upgrade in overall power demand structure. While the sector’s valuation re‑rating may initially reflect risk‑on sentiment, a transition from logic‑driven trading to earnings‑driven investment may require more time, possibly into the second half of the year, though the sector exhibits potential for stepwise upward movement. Another fund manager focused on grid investment observed that AI compute growth is increasing electricity loads beyond the capacity of traditional grids; computing‑power and electricity coordination can dynamically schedule compute clusters and green power resources to resolve structural supply issues, and policy support for ultra‑large computing centers and supporting grids—such as UHV transmission, flexible DC distribution, and storage for peak shaving—could materially boost orders for leading equipment suppliers and create trillion‑yuan scale incremental demand for the industry.

Domestic Demand Recovery Offers Promising Outlook - The Government Work Report places “building a strong domestic market” at the top of its ten major tasks, stressing demand‑led growth and coordinated measures to promote consumption and expand investment, thereby unlocking new space for domestic demand growth and leveraging China’s super‑scale market advantages. Tianhong Fund believes that 2026 consumption policy will remain forceful and structurally improved; the report’s first‑time proposal to formulate and implement an urban‑rural resident income growth plan and its support for pilot programs such as staggered school holidays and paid staggered vacations for workers aim to stimulate consumption by creating both financial capacity and leisure time, making a domestic consumption rebound plausible.

Xingshi Investment notes that expanding domestic demand has been prioritized for two consecutive years, with policy emphasis shifting toward service consumption and effective investment. Policy measures will act on both supply and demand: on the demand side, optimization of “two new” policies, issuance of ultra‑long special government bonds totaling RMB 250 billion to support trade‑in programs for consumer goods, establishment of RMB 100 billion in fiscal‑financial coordinated funds to promote domestic demand, and combined use of loan subsidies, financing guarantees and risk compensation are designed to expand consumption; on the supply side, efforts to create high‑visibility new consumption scenarios and upgrade service capacity aim to increase quality supply and further stimulate household consumption. Given early signs of consumption momentum in the first two months, Xingshi expects that coordinated policy action on both supply and demand could unleash robust endogenous growth in China’s consumer market.

Harvest Fund also highlights that the Government Work Report’s emphasis on targeted consumption‑boosting actions and the cultivation of emerging and future industries provides clearer direction for capital markets to capture sectoral opportunities. Looking ahead, Harvest Fund suggests investors actively seek value re‑evaluation opportunities in low‑position domestic demand sectors and cyclical assets that stand to benefit directly from trade‑in programs and expanded goods and services consumption.

Equity Markets Poised For Continued Gradual Uptrend: 

Overall, fund companies generally agree that the Two Sessions’ positive policy signals will help restore market confidence and risk appetite, supporting a continuation of the market’s bullish trend. Domestic demand and technological innovation are expected to replace real estate as principal growth drivers, and this structural economic transition should create opportunities for companies aligned with strategic priorities. HSBC Jintrust Fund notes that while recent overseas geopolitical tensions have affected global capital markets, their impact on domestic markets has been mainly at the short‑term risk‑preference level; with proactive fiscal policy and moderately accommodative monetary policy continuing in 2026, the macro environment supported by improving fundamentals and strong policy backing should persist. As post‑holiday production resumes and growth‑stabilizing policies take effect, the market may enter a new upward phase, and investors are advised to adopt balanced allocations across multiple directions, focusing on midstream manufacturing, cyclical sectors benefiting from demand improvement, and technology sectors driven by industrial trends.

Invesco Great Wall Fund observes that the Government Work Report conveys constructive signals by maintaining growth targets and policy support while elevating the importance of cultivating new economic drivers and raising support for technological innovation. In an uncertain external environment, positive policy expectations can bolster market confidence and risk appetite, supporting a gradual uptrend in A‑shares. Recommended allocations include new infrastructure related to AI and green development, AI+ application areas, and selective entry into domestic consumption on dips, particularly service‑oriented industries.

Pengyang Fund Assistant General Manager and Chief Equity Investment Officer Zhang Xun believes the Two Sessions’ core themes—new productive forces, domestic demand stimulation and deepening reform dividends—imply an ongoing structural rotation in market composition. He describes the market shifting from a “dumbbell” to a “barbell” structure: one pole comprised of traditional high‑quality leaders with attractive valuations and core asset characteristics, the other pole represented by broad technology chains led by AI with substantial growth potential, while the crossbar includes consumer services and certain cyclical sectors.

Caitong Fund suggests that investors may focus on three long‑term themes derived from the Two Sessions: new productive forces centered on high‑tech and advanced manufacturing; a digital China agenda aiming to raise the digital economy’s share from 10.5% to 12.5%; and green, low‑carbon energy transition driven by a shift from energy‑consumption dual control to carbon‑emission dual control. Coupled with the 15th Five‑Year Plan’s proposed 109 major projects across new productive forces, modern infrastructure and green low‑carbon fields, priority investment areas may include compute and industrial software, clean energy and new power systems, high‑end equipment and industrial machine tools, aerospace and low‑altitude economy, equipment upgrades and trade‑in programs, as well as future industries such as future energy, quantum technology, embodied intelligence, brain‑computer interfaces and 6G.

Chen Xianshun, Chief Equity Strategy Analyst at Bosera Fund, summarizes that three thematic directions merit attention: technological innovation and advanced manufacturing including AI, high‑end equipment and semiconductors; industries related to energy transition such as new energy, grid upgrades and storage; and consumption upgrade and service consumption including healthcare, elderly care and cultural tourism. These areas align with national industrial upgrade priorities and offer solid long‑term growth potential.

Ping An Fund expects that earnings of high‑quality Chinese listed companies will recover significantly over the next two to four quarters, and with moderately accommodative monetary policy and active fiscal measures, both A‑shares and Hong Kong stocks should continue to benefit from combined numerator and denominator improvements. The market remains on an upward trajectory, supported by policy and improving fundamentals.