CITIC Securities: Short-term pullback does not change the spring rally; "technology + resources" remains the main theme.

Author: Xia Fanjie, CITIC Securities

Following the sell-off in broad-based ETFs and the sharp fluctuations in international gold and silver prices, market sentiment has cooled significantly, and the market faces short-term downward pressure. However, the downside for the A-share index is limited, and it is expected to stabilize before the Spring Festival, ushering in a new round of upward movement around that time. In terms of sector allocation, we remain optimistic about the long-term dual-theme of "technology + resource commodities." Short-term market style rotation is accelerating, with previously corrected technology sectors, financial sectors, and midstream manufacturing expected to perform well in the short term. Key sectors to watch include: power equipment (energy storage, ultra-high voltage, photovoltaics, solid-state batteries, etc.), non-bank financial institutions, banks, AI (optical communication, storage, etc.), coal power, home appliances, automobiles, and steel.

summary

Behind the dramatic fluctuations in gold and silver prices, "weak dollar trading" strategies were exited with profits.

The recent sharp fluctuations in international precious metal prices are due to several factors, including the Federal Reserve Chairman nomination breaking market expectations of a dovish stance, short-term profit-taking and a sell-off by leveraged funds, and the strong speculative nature of silver amplifying volatility. It is expected that the next Federal Reserve Chairman, Warsh, will prioritize "balance sheet reduction and interest rate cuts" as core policies, potentially leading to a steeper yield curve. Under this expectation, those who "traded on a weak dollar" are taking profits, but overall, US stocks have not seen significant volatility. High-growth industries such as AI are expected to benefit from subsequent interest rate cuts, and the financial sector is also anticipated to benefit.

February A-share outlook: Short-term downward pressure looms, spring rally not yet over.

On January 30th, due to sharp fluctuations in international precious metal prices and liquidity pressures caused by recent large-scale selling of A-share broad-based ETFs, the sentiment index declined significantly, issuing a right-side sell signal and facing the test of falling out of the overbought zone. Considering the seasonal effect of rising risk aversion before the Spring Festival and the decline in the sentiment index, we expect the market to face short-term pressure from cooling sentiment and index correction. Taking into account the current incremental funds in the market and various sub-indices of the sentiment index, we expect the adjustment space of the A-share index to be limited, and it is likely to stabilize before the Spring Festival, ushering in a new round of upward trend around the Spring Festival.

We are optimistic about the continuation of the spring rally. The first quarter saw ample new capital inflows, and as the sell-off in broad-based ETFs gradually subsides, the market's new capital inflows are expected to improve significantly. Meanwhile, there have been numerous recent policy benefits (new regulations on strategic investment) and industry catalysts (the release of national capacity electricity pricing policy and numerous highlights in AI large-scale models). From a seasonal perspective, February typically has a higher success rate and better profit potential.

Adhering to the dual theme of "technology + resource commodities" for a long time, the style shift is accelerating in the short term.

We remain optimistic about the long-term prospects of the "technology + resource commodities" dual-theme. In the short term, market style rotation is accelerating. The technology sector has already experienced a correction and will benefit from ample liquidity and high risk appetite during the spring rally. Meanwhile, policy dividends such as strategic investment regulations, the introduction of national capacity electricity pricing policies, and industry catalysts like AI big data models will also support the rise of the technology growth sector. The financial and midstream manufacturing sectors, which have seen significant declines previously, are also expected to rebound.

Taking into account industry prosperity, industry catalysts and external influences, the key sectors to focus on in the near term are: power equipment (energy storage, ultra-high voltage, photovoltaic, solid-state batteries, etc.), non-bank financial institutions, banks, AI (optical communication, storage, etc.), coal power, home appliances, automobiles, and steel.

Behind the dramatic fluctuations in gold and silver prices, "weak dollar trading" strategies were exited with profits.

The A-share market experienced significant volatility on Friday, with major indices all fluctuating by more than 2%. The Shenzhen Component Index saw a fluctuation of 2.57%, the Shanghai Composite Index 2.12%, and the Wind All A Index 2.34%. The market closed lower overall, with the Shanghai Composite Index, Shenzhen Component Index, and CSI 300 Index falling by 0.96%, 0.66%, and 1.00%, respectively. The core driving factor was the sharp decline in the non-ferrous metals sector triggered by volatile international precious metal prices, coupled with increased risk aversion and the withdrawal of leveraged funds, all contributing to the heightened market volatility.

Why have international precious metal prices fluctuated so dramatically recently? How will this affect the market? We attempt to analyze this briefly below:

Shifting expectations led to a sharp rise and fall in gold and silver prices.

We believe there are three main reasons for the recent sharp fluctuations in international precious metal prices, with the core reason being that the nomination of the Federal Reserve Chairman broke the market's dovish expectations.

A shift in Federal Reserve policy expectations triggered a stronger dollar: US President's nomination of hawkish Kevin Warsh as Federal Reserve Chairman, whose advocacy of "balance sheet reduction + interest rate cuts" broke market dovish expectations, propelled the dollar index to a rapid rise. The attractiveness of dollar-denominated precious metals decreased, directly suppressing prices. Furthermore, weakened market expectations for a March rate cut by the Fed further amplified short-term bearish sentiment.

Short-term profit-taking and leveraged fund sell-off: In January 2026, precious metal prices surged rapidly, with gold rising by over 30% and silver by 60%, entering a severely overbought technical phase (gold's RSI index reached a 40-year high). Early speculative funds had a strong need to take profits, coupled with the triggering of programmed stop-loss orders by leveraged funds, leading to a chain reaction of selling.

Silver's strong speculative nature leads to more volatile price swings: Due to its dual financial and industrial attributes, silver experiences greater price fluctuations. On one hand, demand has surged in sectors such as photovoltaics, new energy vehicles, and AI data centers, driving inventories to a ten-year low. On the other hand, high prices have spurred technological substitution in industries (such as replacing silver with copper), raising concerns about the sustainability of demand and exacerbating price volatility. Furthermore, the silver market is smaller than gold and is not a traditional investment vehicle, attracting more speculative capital, particularly leveraged funds, which further intensifies silver price volatility.

Can the "weak dollar trade" continue?

The recent significant rise in gold, silver, and even copper, aluminum, and crude oil prices is essentially a concentrated manifestation of the "weak dollar trade." In the long term, this reflects a lack of trust in US fiscal discipline and the dollar monetary system. The medium-term logic stems from the impact of the "Greenland buyout" on the US alliance system and the new trend of European capital "selling off America." In the short term, it is driven by the change of Federal Reserve chairman and Trump's statements that he is not worried about dollar depreciation; Trump even hinted that he could manipulate the dollar's exchange rate, saying, "I can make it bounce like a yo-yo." (News source: CBN)

Therefore, we have seen the US dollar index weaken rapidly since late January, falling quickly from 99.37 on the 16th to 95.77 on the 27th, the lowest level since March 2022. Global funds rushed to engage in "weak dollar trading," going long on precious metals and other physical assets, pushing this long-term trend that is expected to occur over the next few decades to its extreme within a week, before immediately experiencing a backlash.

The turning point came on January 30th local time when US President Trump finally announced his nominee for the next Federal Reserve Chairman: former Fed Governor Kevin Warsh. Warsh, long known for his hawkish stance, changed his tune last year, responding to Trump's calls for significant interest rate cuts, which was seen as key to his nomination. For the market, Warsh's long-standing hawkish position led investors to believe he was better positioned to maintain the Fed's independence than other candidates. This significantly altered previous market expectations of a rapid decline in the dollar index, causing a swift profit-taking in the global "weak dollar trade," resulting in a stronger dollar and a sharp drop in precious metals.

How did Warsh change the Federal Reserve?

After a brief period of uncertainty, we must focus on a key question: How will Warsh change the Fed’s policy, and what impact will that have on the market?

In 2006, Warsh was nominated by President George W. Bush to serve as a member of the Federal Reserve Board of Governors, becoming the youngest governor in the Fed's history. During his tenure, coinciding with the global financial crisis, Warsh leveraged his experience working on Wall Street to help then-Fed Chairman Ben Bernanke connect with Wall Street financial institutions. In 2010, when the Fed launched its second round of quantitative easing (QE), Warsh expressed his opposition. In March 2011, Warsh resigned from the Federal Reserve.

In the more than 14 years since leaving the Federal Reserve, Warsh has become a critic of the organization. He has also specifically criticized Powell's monetary policy. Warsh's criticisms of the Fed mainly include: First, the Fed's role has become increasingly broad, even venturing into areas of national governance and shaping social values, resulting in a "drift" of institutional functions. He believes that the Fed's overexpansion of its role undermines the important and reasonable claim of "monetary policy independence." Second, since 2008, the Fed has become the largest buyer of U.S. Treasury bonds, with an excessively large balance sheet of $7 trillion, distorting the market. He believes that after the crisis, the Fed should "return to its original boundaries."

Warsh's core policy: balance sheet reduction + interest rate cuts

Balance sheet reduction is the core of Warsh's policy, and he has explicitly made reforming the Federal Reserve's massive $6.6 trillion balance sheet a primary objective. Warsh believes the Fed's assets are too large and a new coordination mechanism with the Treasury should be established to reduce the Fed's direct influence on the money market. This has alleviated investor concerns about a weakening dollar and led to the recent sharp decline in non-ferrous metals. If the balance sheet reduction policy is implemented, overseas dollar liquidity may tighten, potentially driving the dollar to strengthen in stages. Furthermore, balance sheet reduction will also affect demand for US Treasury bonds, causing market volatility. In the long term, balance sheet reduction may eliminate the "Fed Put," the psychological dependence that the Fed will stop tightening and instead ease monetary policy to rescue the market during a major market downturn. This could allow risk to return to its intrinsic value, meaning that risky assets may experience significant declines when fundamentals deteriorate. Simultaneously, balance sheet reduction will raise long-term interest rates, limiting government debt expansion and economic bubbles.

Cutting interest rates is another major policy direction for Warsh, which satisfies Trump's demands and echoes Warsh's criticisms of Powell's monetary policy in recent years. According to reports during the midday trading session on Friday, January 30th, Trump stated in his White House office that Warsh would lower interest rates without pressure from the White House. Trump said that Warsh had not promised him a rate cut, but he "of course wants to cut rates." However, unlike Trump's aim of drastically cutting rates to stimulate the economy and boost his midterm election campaign, Warsh's rate-cutting policy is not aimed at stimulating demand, but rather at the supply side. Its core purpose is likely to reduce the burden on various entities, including the government, and encourage productive investment (rather than financial speculation).

Warsh's policy implications: steepening of the yield curve

Unlike the current market's habit of "massive stimulus," Warsh's policy combination of "balance sheet reduction + interest rate cuts" may lead to a steeper yield curve and "liquidity stratification." Its main impacts include:

Profit-taking and exit from "weak dollar trades" could lead to panic selling in the non-ferrous metals sector in the short term, and its long-term upside potential may also be limited.

Balance sheet reduction is expected to drive a significant decline in US inflation.

Capital is flowing out of junk assets and financial speculation and into the real economy. Financing costs are rising in highly indebted economies, while economies with high growth potential are attracting more investment.

Market volatility has increased, and risks have returned.

Although the non-ferrous metals and financial sectors experienced a sharp decline, the overall US stock market remained relatively stable, and high-growth industries such as AI are expected to benefit from subsequent interest rate cuts.

A steeper yield curve is beneficial to the financial sector (especially banks, which benefit from increased net interest margins).

The positive impact on technology growth and the financial sector may affect my country's A-share and Hong Kong stock markets through the global linkage of the yield curve.

The challenges facing Walsh:

Walsh still needs approval from the U.S. Senate before he can officially assume office, which may face some uncertainty, but the overall uncertainty is limited.

Warsh needs to simultaneously satisfy Trump's expectation that the Fed will obey his will, and the market's expectation that the Fed will maintain its policy independence.

Interest rate decisions are made by a vote of the 12 members of the Federal Reserve Board of Monetary Policy (FOMC). While the Fed Chair wields significant influence, he does not have unilateral decision-making power. Warsh's past public and sharp criticism of the Fed leadership may pose a test of trust among his new colleagues.

Warsh pledged to break with this tradition—to completely rethink the Fed's asset holdings, policy framework, economic role, and relationship with the executive branch. In fact, to achieve the policy mix of "balance sheet reduction + interest rate cuts," Warsh also needs to adjust the Fed's current monetary policy rules and implementation framework, and obtain majority approval from the members of the Monetary Policy Committee.

Warsh's policies reversed the current expectation of a weak dollar, which aligns with Bessant's policy inclination towards a strong dollar (and also serves Wall Street interests given their Wall Street backgrounds), but seems to deviate from Trump's policy of a weak dollar.

It is necessary to assess the impact of Trump's reshaping of the global trade landscape, to judge the profound changes that artificial intelligence will bring to productivity and the labor market, and to deal with the potential impact of the rise of digital assets on the banking regulatory system.

February A-share outlook: Short-term downward pressure looms, spring rally not yet over.

Cooling sentiment signals a sell opportunity on the right side, and the market faces short-term downward pressure.

Our investor sentiment index, which we have built and continuously track, shows that market sentiment rapidly warmed up after the start of the year, rising quickly from below 80 at the end of last year to above 88 by mid-month. While the policy orientation of "stability first" curbed the "frenzied rise" in stock prices, the abundant incremental funds still indicate high investor sentiment. The Wind All A-Shares Index also remained high, and by January 20th, the sentiment index had broken through 90 again, entering the euphoric zone. Afterwards, it generally fluctuated narrowly between 90 and 93, reflecting the tug-of-war between the market's inherent impulse to "accelerate to the top" and the regulatory "proactive cooling." On January 30th, due to sharp fluctuations in international precious metal prices and liquidity pressure caused by the recent large-scale sell-off of A-share broad-based ETFs, the sentiment index declined significantly, issuing a right-side sell signal and facing the test of falling out of the euphoric zone. Considering the seasonal effect of rising risk aversion before the Spring Festival and the decline in the sentiment index, we expect the market to face short-term pressure from both cooling sentiment and index correction.

Some sentiment indicators also suggest that the market faces short-term downward pressure. For example, the turnover rate has remained high, fluctuating above 2%, indicating that the market is still overheated and a significant correction is possible. The issuance of equity-oriented funds has also surged again recently, reaching a recent high on the 28th; this surge often corresponds to a market peak. However, other indicators reflecting market strength, such as those exceeding the 60-day moving average and overbought/oversold levels, have fallen from their highs, suggesting that the overall downward pressure on A-shares is limited. (See "After a Surge at the Start of the Year, Market Sentiment Cools Down Actively – January Market Sentiment Tracking Report")

Taking into account the current incremental funds in the market and various sub-indices of the sentiment index, we expect the adjustment space of the A-share index to be limited, and it is likely to stabilize before the Spring Festival, ushering in a new round of upward trend around the Spring Festival.

Will the sell-off in broad-based ETFs continue?

On January 15th, the China Securities Regulatory Commission (CSRC) held its 2026 system-wide work conference, proposing to "adhere to the principle of stability and promptly implement counter-cyclical adjustments." Following this, major market index ETFs experienced a large-scale sell-off, suppressing the market's upward momentum and gradually cooling market sentiment. According to our monitoring of major ETF products, the CSI 300, CSI 1000, SSE 50, and CSI 500 ETFs have recently been the main targets of selling, while the Innovation Board and A500 ETFs have also experienced smaller-scale sell-offs.

If we focus on the recent movements of ETFs held by Huijin, we can see that approximately 53-66% of the shares of the CSI 300 ETF held by Huijin decreased recently (January 15-29), approximately 73-91% of the shares of the CSI 1000 ETF held by Huijin decreased, and the decrease in the shares of the SSE STAR Market 50 ETF was as high as 94%. The estimated outflow of funds is approximately 913.4 billion yuan.

Will the sell-off of broad-based ETFs continue? We believe that the scale of the sell-off in broad-based ETFs is likely to decrease significantly or even stop completely next week. The reasons are as follows: 1) According to our monitoring data, market sentiment has cooled significantly, and the tightening effect of the previous ETF sell-off on market liquidity has begun to appear; 2) The sharp fluctuations in international gold and silver prices and the shift in expectations for a weak global dollar have led to increased risk aversion and a wait-and-see attitude in the market. Coupled with the approaching Spring Festival, the willingness to seek safe havens has further increased, making further cooling unnecessary; 3) The size of Huijin ETFs has decreased by about 60%, and a certain amount of ETFs still needs to be retained as a tool for future regulation. Therefore, for the A-share market, although it still faces short-term pressure from cooling sentiment and correction, with the cessation of the ETF sell-off, the market is expected to stabilize and accumulate energy for the next round of upward movement.

Optimistic about the continuation of the spring rally

Although there is short-term downward pressure, we remain optimistic about the continuation of the spring rally for three reasons:

Ample incremental funds: In our previous in-depth report, "Funds as the Foundation, Prosperity as the Guiding Principle – A-Share Funding Outlook for 2026 (Part 2)," we pointed out that this year will see a wave of maturing time deposits, with approximately 45 trillion yuan maturing, particularly in the first quarter. This makes the first quarter the period with the most abundant incremental funds throughout the year. As the sell-off of broad-based ETFs gradually comes to an end, the market's incremental funds are expected to improve significantly.

There are numerous policy benefits and industry catalysts: On January 30th, the China Securities Regulatory Commission (CSRC) publicly solicited opinions on revising the "Securities and Futures Legal Application Opinion No. 18," which is essentially a systematic improvement to the strategic investment system. By clarifying the scope of entities, shareholding requirements, empowerment responsibilities, disclosure obligations, and regulatory bottom lines, it not only opens channels for medium- and long-term funds to enter the market but also prevents abuse of the system through strict supervision. The new system is a significant boon for attracting medium- and long-term funds to deeply participate in the operation of listed companies and industrial upgrading, and is expected to activate A-share mergers and acquisitions and boost market risk appetite. In addition, the national capacity electricity price policy has been introduced, completing the final piece of the energy storage puzzle. Recently, there has been a lot of buzz surrounding AI large-scale models: Silicon Valley's Clawdbot has become a hit both overseas and domestically, becoming the most anticipated AI blockbuster of 2026. Domestic AI large-scale models such as DeepSeek-OCR2, Kimi K2.5, and Alibaba's Qwen3-Max-Thinking have all released their major features.

From a seasonal perspective, February typically sees a higher success rate and better profit potential: Our analysis of the February performance of major indices over the past 12 years shows that the Shanghai Composite Index and CSI 2000 Index had success rates of 75% and 83% respectively, while the Wind All A Index and ChiNext Index also achieved a success rate of 58%. In terms of average gains, small-cap and technology growth stocks outperformed, with the CSI 2000 Index and ChiNext Index averaging gains of 5.18% and 3.92% respectively, and the Shanghai Composite Index and Wind All A Index averaging gains of 2.00% and 3.15%. Overall, February is a crucial period for the spring rally (between the Spring Festival and the Two Sessions), and investor enthusiasm for buying is often high. Combined with the current bullish market atmosphere, a new round of upward movement is expected after the Spring Festival.

Adhering to the dual theme of "technology + resource commodities" for a long time, the style shift is accelerating in the short term.

In our 2026 A-share strategy outlook report, "A New Journey of Slow Bull Market: Strategizing for the Present, Laying the Foundation for the Future," published last November, we pointed out that 2026 would be a critical period for verifying the A-share market's growth momentum, with intensified sector rotation. We were optimistic about the technology growth theme, while resource commodities were likely to become a new main theme for A-shares after technology. Recently, the dual theme of "technology + resource commodities" has become evident, with accelerated style rotation: starting in late December, the technology sector, represented by commercial aerospace, rapidly strengthened, leading the A-share market; as the China Securities Regulatory Commission (CSRC) implemented counter-cyclical adjustments, technology hotspots shifted, and funds turned to cyclical commodities represented by non-ferrous metals and chemicals, while sectors such as home appliances, automobiles, and photovoltaics fell significantly due to concerns about rising raw material costs; however, with the recent sharp fluctuations in international precious metal prices, funds shifted back to the technology growth style on Friday, and cyclical sectors experienced a sharp decline. Looking ahead, we remain optimistic about the long-term performance of the dual theme of "technology + resource commodities," while short-term fund flows are influenced by factors such as the economic climate (e.g., annual report earnings forecasts), industry catalysts, and the external environment.

Annual report performance forecasts: Significant industry differentiation, with non-bank financial institutions, non-ferrous metals, and automobiles showing strong growth.

As of January 31, 2026, the disclosure of 2025 annual report performance forecasts by A-share listed companies has been largely completed. Looking at the overall performance of the currently disclosed samples, the median change in net profit forecasts for all A-share companies reached 29%, indicating a moderate recovery in corporate profitability. Regarding profit size, if the average of the upper and lower limits of the forecasted net profit is used to estimate the net profit attributable to the parent company for the current period, the average profit size of the disclosed companies is...

It is approximately 52.3 million yuan. The data indicates that although the macroeconomic environment remains challenging, the profit center has shown an improving trend.

Industry performance is showing significant divergence, with resources and finance leading the way while domestic demand faces pressure. The distribution of earnings revisions and growth across industries exhibits a clear clustering effect: the non-ferrous metals industry leads all sectors with a median net profit change of 81%, and its positive forecast rate is as high as 66%, reflecting the impact of upstream resource price fluctuations.

Despite the fluctuations, the sector still possesses strong pricing power. The non-bank financial sector follows closely behind, with a median forecast of 76% for net profit change and a positive forecast rate reaching an absolute high of 88%, confirming the positive boost to asset allocation and related business profits from the capital market recovery. In contrast, the median forecast of net profit change for the real estate, retail, and food and beverage industries is below -60%, and the negative forecast rate exceeds 70%, indicating that the consumer sector and traditional industries such as real estate still need to recover.

Overall, the non-ferrous metals, non-bank financial institutions, steel, automobiles, utilities, beauty and personal care, machinery and equipment, and textiles and apparel sectors saw the highest median net profit changes, all exceeding 45%. Non-ferrous metals, non-bank financial institutions, steel, and utilities significantly exceeded market expectations. Technology sectors such as electronics, communications, computers, media, power equipment, and pharmaceuticals also saw median net profit changes exceeding 23%, continuing their rapid growth trend.

Performance confirms the main market trend, with leading companies in each sector showcasing their unique strengths.

Industry expectations exhibit significant heterogeneity, with sectors showing both high growth and low divergence, while those under pressure face deep adjustments and uncertain expectations. Observing the overall bias and internal structure of earnings forecasts across various industries reveals distinct characteristics within each sector's overall performance expectation direction. Sectors such as non-bank financial institutions and non-ferrous metals not only show significant net optimistic expectations, but the median net profit growth forecasts of their companies with positive expectations also reach 85% and 108% respectively. Simultaneously, the expectation divergence is relatively low at 59% and 188%, indicating strong profit support and internal consensus for their optimistic expectations. On the other hand, most industries show net pessimistic expectations, with real estate and coal exhibiting the deepest levels of pessimism. It is noteworthy that some net pessimistic sectors show significant differences in internal structure: for example, the defense and military industry and the power equipment industry have relatively moderate median net profit adjustments for companies with negative expectations, and their expectation divergence is lower than many other net pessimistic industries; while the steel industry has an overall pessimistic outlook, the net profit of companies with negative expectations is showing strong growth, indicating a profit recovery trend; while the retail and real estate industries face both deep net profit adjustments and extremely high expectation divergence.

Industry Catalysts: New Energy and AI to Benefit

The nationwide capacity pricing policy has been introduced, marking a crucial step in the power system's transition to a higher proportion of renewable energy.

The National Development and Reform Commission and the National Energy Administration recently jointly issued the "Notice on Improving the Capacity Pricing Mechanism on the Generation Side," officially launching the national capacity pricing policy. We believe this marks a transformation in my country's electricity market from a "single electricity pricing" model to a multi-dimensional value system encompassing "electricity + capacity + ancillary services." By clarifying the capacity compensation mechanism for regulating power sources such as coal-fired power and new energy storage, the policy not only ensures the recovery of fixed costs for traditional power sources but also establishes the system value of new energy storage at the national level for the first time, providing a stable source of revenue for the energy storage industry and taking a crucial step towards a high-proportion renewable energy transition in the power system.

The energy storage industry is expanding rapidly: the national unified capacity mechanism breaks down the differences between local pilot projects, and the demand side of the domestic energy storage industry chain is expected to explode in 2026, with leading companies particularly benefiting from the growth in demand for long-term energy storage.

Restructuring the value of the power system: For the first time, the policy has priced "reliable capacity" as an independent commodity. Capacity pricing provides a security guarantee for the grid connection of high proportions of renewable energy, which will promote the coordinated development of renewable energy and regulatory resources.

The transformation of coal-fired power is deepening: capacity pricing is guiding coal-fired power plants to shift from "base load operation" to "peak shaving", increasing the demand for unit flexibility upgrades and enhancing the profitability stability of thermal power companies with locational advantages.

The AI ​​large-scale model has shown many highlights.

Recently, the field of large-scale AI models has shown a dual-driven characteristic of "technological architecture innovation and accelerated scenario implementation." Internationally, Clawdbot (later renamed Moltbot) redefined the AI ​​agent model with its "local-first + reverse control" architecture. Domestically, Alibaba's Qwen3-Max-Thinking achieved a leap in inference performance with its trillion-parameter scale and test-time scaling technology, rivaling GPT-5.2 and Gemini 3 Pro; DeepSeek-OCR2 broke through the bottleneck of complex document understanding through a causal flow query mechanism; and Kimi K2.5 enhanced long text processing and agent cluster collaboration capabilities. Overall, lightweight, localization, and scenario-based approaches have become the main lines of technological evolution, with the open-source ecosystem and commercialization forming a positive cycle, driving AI to leap from "dialogue interaction" to "autonomous action."

External Impacts: The "weak dollar trade" pauses; which industries benefit?

With Warsh's nomination as the new Federal Reserve Chairman, the "weak dollar trade" has been closed out, the dollar index has risen, and the yield curve has steepened. Which industries will benefit the most?

Finance (Banking): If Warsh's policy combination of "balance sheet reduction + interest rate cuts" is implemented, it will steepen the US Treasury yield curve and also affect the global yield curve. For A-shares and Hong Kong stocks, the financial sector, especially banks, will benefit from the increase in net interest margin and improved profit expectations.

Midstream Manufacturing (Home Appliances, Automobiles, Photovoltaics): Recently, midstream manufacturing sectors such as home appliances, automobiles, and photovoltaics have all experienced significant declines. One possible reason is investor concern that a sharp rise in upstream raw material prices (such as copper and silver) without a significant improvement in downstream demand could impact industry gross margins. With the sharp drop in the non-ferrous metals sector on Friday, this concern is expected to ease significantly, benefiting the return of related sector stock prices to reasonable levels.

Overall, we remain optimistic about the long-term prospects of the "technology + resource commodities" dual-theme. In the short term, market style rotation is accelerating. The technology sector has already experienced a correction and will benefit from ample liquidity and heightened risk appetite during the spring rally. Policy dividends such as strategic investment regulations, the introduction of national capacity electricity pricing policies, and industry catalysts like AI big data models will also support the rise of the technology growth style. The financial and midstream manufacturing sectors, which have seen significant declines previously, are also expected to rebound. Considering industry prosperity, industry catalysts, and external influences, our recent sector allocation focus is on: power equipment (energy storage, ultra-high voltage, photovoltaics, solid-state batteries, etc.), non-bank financial institutions, banks, AI (optical communication, storage, etc.), coal power, home appliances, automobiles, and steel.

The effects of policies supporting domestic demand have fallen short of expectations. If subsequent domestic real estate sales and investment data fail to recover, inflation remains low, consumption fails to show a significant boost, and corporate profit growth continues to decline, ultimately disproving the economic recovery, then the overall market trend will be under pressure, and overly optimistic pricing expectations will need to be revised.

The strategic rivalry between China and the US is escalating, posing a risk of its expansion and intensification. For example, the strategic rivalry could spread from trade to multiple areas such as technology, key resources, finance, shipping, logistics, and the military, leading to a comprehensive strategic conflict. This could disrupt normal economic activity and impact equity markets.

The volatility in the US stock market exceeded expectations. If the US economy deteriorates more than expected, or if the Federal Reserve's easing measures fall short of expectations, it could lead to significant fluctuations in the US stock market, which would also have spillover effects on domestic market sentiment and risk appetite.