The impact from overseas markets may gradually weaken.
**I. Market Overview: External Factors Dampen Risk Appetite** Between February 2nd and February 6th, the market experienced weak fluctuations with continuously shrinking trading volume. The performance of A-shares moved in sync with global risk assets, heavily influenced by external factors. Concerns over a marginal tightening of global liquidity and shifts in the AI narrative were the primary reasons for the decline in risk appetite.
From a structural perspective, defensive sectors such as consumer staples and financials performed relatively well. In contrast, technology growth and cyclical styles, which had seen significant gains and higher valuations previously, underwent a correction, indicating a clear shift in market style.
**II. Key Factors Influencing This Week's Market:** 1. **Earnings Previews Indicate Continued Recovery in Corporate Profits.** According to Wind data, as of January 31st, 3,057 listed companies had disclosed earnings previews. Among them, 1,638 companies reported positive forecasts, accounting for 53.6%, while 1,518 companies anticipated profitability. Overall, corporate profits for 2025 are showing signs of stabilization and recovery. Structurally, the ChiNext Board showed significant improvement in profit growth, primarily driven by strong earnings from overseas AI/high-performance computing heavyweight stocks and narrowing losses at some new energy companies. Boosted by the realization of earnings from domestic computing leaders, the STAR Market also reached an inflection point. By sector, non-bank financials and non-ferrous metals performed well, while traditional industries still require further earnings recovery.
2. **Margin Trading Funds Slightly Receded, Investor Sentiment Remains Stable.** As of February 5th, the balance of margin trading funds was 2,664.054 billion yuan, a slight decrease of 34.6 billion yuan compared to January 30th.
3. **Expectations for Overseas Liquidity Tightening Persist, Driving Volatility.** Divergent comments from Federal Reserve officials this week kept interest rate cut expectations relatively stable, with markets pricing in the first cut likely occurring in June 2026. However, market expectations for potential liquidity tightening under a new Fed Chair, possibly leading to balance sheet reduction, continued to build. This triggered volatility in global risk assets through a chain reaction: significant prior gains in risk assets led to worries about liquidity tightening under a new chair, prompting early selling of high-valuation assets and a flight to defensive holdings, ultimately causing price declines in risk assets. This week, the US Dollar Index rebounded above 97, while falling US Treasury yields reflected a risk-off mood. Globally, high-valuation assets saw collective adjustments, with the Nasdaq Index falling nearly 4%, the Korea Composite Index dropping almost 3%, and the price of gold in London declining over 10% from its peak last week.
4. **Mixed Signals from US Economic Data.** On one hand, forward-looking indicators were strong. The US ISM Manufacturing PMI for January surged to 52.6% from the previous 47.9%, significantly exceeding expectations. The US ISM Services PMI for January came in at 53.8, also better than market forecasts. On the other hand, the US ADP employment data for January fell notably short of expectations, adding only 22,000 jobs, indicating a further slowdown in the US labor market at the start of the year.
**III. Outlook: External Influences Expected to Fade** Looking ahead, market concerns regarding global liquidity tightening may have already been partially priced in. Significant uncertainty remains about whether the Fed will actually engage in balance sheet reduction this year. As expectations for liquidity tightening are fully digested, the performance of global risk assets is expected to improve, and the A-share market is anticipated to return to an upward trajectory.
From a medium-term perspective, the overall risk premium for A-shares has returned to a moderately low level historically, leaving limited room for valuation alone to drive the market higher. Domestic corporate earnings growth remains the core factor for unlocking further upside potential in the market. The current trend of stabilizing and recovering profits for listed companies in 2025 is visible, and it is expected that more sectors will enter a period of earnings realization this year, suggesting that numerous investment opportunities in the stock market remain to be discovered.
**Risk Disclosure** The information and materials contained in this commentary are sourced from public channels. No guarantee is provided regarding their authenticity, accuracy, adequacy, completeness, or suitability for use. Under no circumstances does the information or opinions herein constitute investment advice for any person, nor are they intended as legal documents. No liability will be accepted for any losses arising from the use of any content in this commentary.
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