With the Lunar New Year holiday, China’s A-shares market will only see trading today.
Besides, the spotlight is on the U.S. Federal Reserve, which will hold its first policy meeting of the year this week. Early Thursday (Beijing time), the Fed will announce its interest rate decision. Markets widely expect a pause in rate cuts for now.
In addition to the Fed, several other central banks, including the European Central Bank, Sweden’s Riksbank, the Bank of Canada, the Central Bank of Brazil, and the South African Reserve Bank, will also reveal their rate decisions in the coming days.
On top of that, U.S. earnings season is heating up. Major tech giants like Apple and Tesla are set to release their quarterly reports this week, drawing significant market attention.
A-shares: The Only Trading Day This Week
Due to the Lunar New Year holiday, today marks the only trading day for A-shares this week. Historically, the market tends to be quiet before the holiday as some investors adopt a cautious approach. However, after the holiday, the market often rebounds as these funds return.
According to Wind data, over the past decade (2015–2024), A-shares have shown a high probability of rising around the Lunar New Year:
- 5 trading days before the holiday: The market gained in 7 out of 10 years, with the largest increase of 3.92% in 2021.
- 5 trading days after the holiday: The Shanghai Composite Index rose in 70% of those years, with the biggest jump of 4.85% in 2024.
- 10 trading days after the holiday: The index continued to rise 70% of the time, with the highest increase of 7.10% in 2019.
Market Outlook and Opportunities
A report by Ping An Securities suggests that, with supportive domestic policies and easing external concerns, the market is expected to maintain an upward trend, with more structural opportunities emerging. Key areas to watch include:
- Growth sectors such as advanced manufacturing and industries driven by new productivity.
- High-quality companies benefiting from policies to expand domestic demand.
- State-owned enterprise (SOE) reforms and opportunities in mergers and acquisitions.
- Dividend strategies for long-term value.
Key Events to Watch
As the Lunar New Year holiday approaches, the following events could influence the market in the coming weeks:
- China’s January Purchasing Managers’ Index (PMI) data.
- Travel and consumer spending during the holiday.
- The U.S. Federal Reserve’s interest rate meeting in January.
- Updates on U.S. policies under Trump’s administration.
Spring Rally in Sight
A report by Haitong Securities notes that the “spring rally” is likely to unfold gradually. With policies taking effect throughout the year, the market could enter a new phase driven by fundamentals. Structurally, sectors like technology and manufacturing appear promising:
- Technology: Supported by favorable policies, technological advancements, and an upturn in the industry cycle.
- Mid-to-high-end manufacturing: Strong domestic supply and stable demand from both domestic and international markets suggest continued growth.
Meanwhile, consumer, pharmaceutical, and real estate sectors may experience shifts in expectations:
- Real estate fundamentals and property prices are expected to stabilize, thanks to stronger fiscal support.
- As household balance sheets improve and fiscal policies provide a boost, the consumer and pharmaceutical sectors could see upward momentum this year.
By monitoring these trends, investors can position themselves for opportunities during and after the holiday season.