Central Plains Strategy: A-shares initially decline then rise, recommending investors adopt a more balanced allocation strategy

Core Viewpoints

Overview of the A-Share Market

On Friday (February 6), the A-share market experienced a pattern of initial decline followed by recovery, with slight fluctuations and consolidation. The indices opened lower and then retreated, but during the session, the Shanghai Composite Index found support near 4029 points, stabilized, and rebounded. During the day, sectors such as batteries, electronic components, consumer electronics, and general equipment performed relatively well; industries like brewing, commercial retail, aerospace, and tourism hotels underperformed. Overall, the Shanghai Composite showed small fluctuations and consolidation throughout the day. The ChiNext Market also declined in a volatile manner on Friday, with its main index underperforming the main board throughout the day.

Market Outlook and Investment Recommendations

On Friday, the A-share market showed a pattern of initial decline followed by recovery, with slight fluctuations and consolidation. The indices opened lower and then retreated, but the Shanghai Composite Index found support near 4029 points, stabilized, and rebounded. Sectors such as batteries, electronic components, consumer electronics, and general equipment performed well; brewing, retail, aerospace, and tourism hotels lagged. The Shanghai Composite maintained a slight fluctuation and consolidation pattern. Currently, the average P/E ratios of the Shanghai Composite and the ChiNext Index are 16.75x and 51.98x respectively, above the median levels of the past three years, suitable for medium- to long-term positioning. The total trading volume on Friday was 2.1636 trillion yuan, above the median daily volume of the past three years. Although the official manufacturing PMI for January slightly declined, manufacturing sectors such as equipment manufacturing and high-tech manufacturing remain in expansion territory, indicating ongoing industry structure optimization. The effects of growth stabilization policies are expected to gradually manifest in the first quarter. Typically, the first quarter is the most liquidity-rich period of the year, with the central bank maintaining a prudent and slightly easing monetary stance. The nomination of the new Federal Reserve Chair has led to a reassessment of the rate cut pace, causing a short-term rebound in the US dollar index and exerting some pressure on global capital flows into emerging markets. Investors are advised to adopt a more balanced allocation strategy, continuing to focus on technological growth themes such as AI and high-end manufacturing, while actively exploring investment opportunities in certain consumer sectors with future potential. The Shanghai Index is likely to maintain a small upward fluctuation. Investors should closely monitor macroeconomic data, overseas liquidity changes, and policy developments. In the short term, attention should be given to investment opportunities in sectors like batteries, electronic components, consumer electronics, and general equipment.

Risk Warning:
Overseas unexpected recession impacting domestic economic recovery; domestic policy and economic recovery progress below expectations; macroeconomic shocks exceeding forecasts; unexpected policy changes; changes in international relations affecting the economic environment; overseas macro liquidity tightening beyond expectations; increased overseas volatility.

Main Report Content

1. Overview of the A-Share Market Trends

On Friday (February 6), the A-share market experienced a pattern of initial decline followed by recovery, with slight fluctuations and consolidation. The indices opened lower and then retreated, but during the session, the Shanghai Composite Index found support near 4029 points, stabilized, and rebounded. Sectors such as batteries, electronic components, consumer electronics, and general equipment performed relatively well; industries like brewing, retail, aerospace, and tourism hotels underperformed. Overall, the Shanghai Composite showed small fluctuations and consolidation throughout the day. The ChiNext Market also declined in a volatile manner, with its main index underperforming the main board throughout the day. The Shanghai Composite closed at 4065.58 points, down 0.25%; the Shenzhen Component Index closed at 13,906.73 points, down 0.33%; the STAR 50 Index fell 0.71%; and the ChiNext Index declined 0.73%. The combined trading volume of the Shanghai and Shenzhen markets was 2.1636 trillion yuan, slightly lower than the previous trading day.

In terms of market hotspots during the session, over 50% of stocks rose. Leading sectors in gains included mining, energy metals, jewelry, batteries, and chemical raw materials; lagging sectors included retail, brewing, tourism hotels, aerospace, and media. Funds flowed most into batteries, chemical products, electronic components, small metals, and consumer electronics; while sectors like communication equipment, internet services, media, software development, and non-ferrous metals experienced net outflows.

2. Market Outlook and Investment Recommendations

On Friday, the A-share market showed a pattern of initial decline followed by recovery, with slight fluctuations and consolidation. The indices opened lower and then retreated, but during the session, the Shanghai Composite Index found support near 4029 points, stabilized, and rebounded. Sectors such as batteries, electronic components, consumer electronics, and general equipment performed well; industries like brewing, retail, aerospace, and tourism hotels underperformed. The Shanghai Composite maintained a slight fluctuation and consolidation pattern. Currently, the average P/E ratios of the Shanghai Composite and the ChiNext Index are 16.75x and 51.98x respectively, above the median levels of the past three years, suitable for medium- to long-term positioning. The total trading volume on Friday was 2.1636 trillion yuan, above the median daily volume of the past three years. Although the official manufacturing PMI for January slightly declined, manufacturing sectors such as equipment manufacturing and high-tech manufacturing remain in expansion territory, indicating ongoing industry structure optimization. The effects of growth stabilization policies are expected to gradually manifest in the first quarter. Typically, the first quarter is the most liquidity-rich period of the year, with the central bank maintaining a prudent and slightly easing monetary stance. The nomination of the new Federal Reserve Chair has led to a reassessment of the rate cut pace, causing a short-term rebound in the US dollar index and exerting some pressure on global capital flows into emerging markets. Investors are advised to adopt a more balanced allocation strategy, continuing to focus on technological growth themes such as AI and high-end manufacturing, while actively exploring investment opportunities in certain consumer sectors with future potential. The Shanghai Index is likely to maintain a small upward fluctuation. Investors should closely monitor macroeconomic data, overseas liquidity changes, and policy developments. In the short term, attention should be given to investment opportunities in sectors like batteries, electronic components, consumer electronics, and general equipment.

(Source: Zhongyuan Securities)