On Friday (December 19), China's A-share market saw broad gains, with all three major indices rising. Nearly 4,500 stocks closed higher, while the combined turnover of Shanghai and Shenzhen exchanges reached 1.73 trillion yuan, up 70.4 billion yuan from the previous session.
Technical analysts noted the Shanghai Composite Index has formed three consecutive daily gains, reclaiming both its 10-day and 20-day moving averages. While encountering resistance at 3,900 points, market watchers are eyeing whether it can break through the 60-day moving average (around 3,912 points) next week—a critical threshold that could signal the end of recent corrections and a return to upward momentum.
The rally followed the release of key U.S. economic data, including November non-farm payrolls and CPI figures, along with the Bank of Japan's expected 25-basis-point rate hike to 0.75%. With these uncertainties resolved, market focus has shifted to domestic A-share fundamentals.
Sector-wise, anti-involution themes continued outperforming. The Chemical ETF (516020) and Nonferrous Metals ETF (159876) rebounded in afternoon trading, gaining 1.75% and 1.64% respectively. Notably, the Chemical ETF attracted 228 million yuan in single-day inflows, reflecting strong investor confidence in the sector's outlook.
In Hong Kong markets, renewed expectations for Fed rate cuts in January and improved global liquidity conditions have spurred buying activity. The Hong Kong Internet ETF (513770) recorded 1.33 billion yuan in net inflows over 10 consecutive days, while the Hong Kong Innovative Pharma ETF (520880) saw nine straight days of net subscriptions, reaching a record 4.178 billion shares outstanding.
BOC Securities maintains that A-shares remain in an upward trajectory, supported by China's policy transition from economic stabilization to quality growth. They anticipate market drivers will shift from policy support to earnings recovery, with 2026 likely bringing structural opportunities from industrial innovation and domestic demand revival.
Open Source Securities recommends a "tech + cyclical" dual strategy, highlighting: 1) Oversold growth opportunities in defense, AI applications, and Hong Kong internet stocks; 2) PPI-recovering sectors like solar, chemicals, metals, and utilities benefiting from anti-involution policies; and 3) Defensive plays including high-dividend stocks and gold.
Key sector updates:
1. Chemicals: The Chemical ETF (516020) surged 1.75% for its third straight gain, with 200 million yuan inflows in five days. Dongxing Securities notes improving supply-demand dynamics as global energy costs decline and inventory cycles turn positive. The sector's PB ratio of 2.4x remains below historical averages, suggesting valuation appeal.
2. Hong Kong Internet: Boosted by Fed pivot hopes and AI developments, the Hang Seng Tech Index rose 1.12%. Tencent and Meituan unveiled new AI initiatives, including Meituan's open-source video generation model and Tencent's hybrid world model framework. The Hong Kong Internet ETF (513770), tracking heavyweights like Alibaba and Tencent, has seen sustained inflows.
3. AI Hardware: While application stocks gained, optical module players showed mixed performance. The ChiNext AI ETF (159363) attracted 370 million yuan in five days despite a 0.32% gain. Analysts expect 2026 to bring volume-price growth for 1.6T optical modules, with Thai capacity expansions by leaders like InnoLight and Eoptolink coming online.
Investors can access these themes through respective ETFs, including the Chemical ETF (516020), Hong Kong Internet ETF (513770), and ChiNext AI ETF (159363), which offer focused exposure to each sector's leaders.
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