Everbright Strategy: Post-holiday performance is worth looking forward to; seize the two main themes of growth and pro-cyclical trends

February A-shares and Hong Kong stocks Show Divergence

In February, major A-share indices mostly rose, with fewer declines, and sector performance was clearly differentiated. The comprehensive, building materials, and defense military industries led the gains. Influenced by positive market sentiment and sustained high risk appetite, most major A-share indices rose in February (up to the 26th), with the CSI 1000 experiencing the largest increase of 2.9% for the month. The ChiNext 50 saw the largest decline, falling 1.6% overall.

Hong Kong stocks experienced a pullback in February. Due to external market volatility and declining market sentiment, the overall trend was more volatile. As of February 26, 2026, the gains for the Hang Seng Hong Kong 35, Hang Seng Index, Hang Seng Composite Index, Hang Seng China Enterprises Index, and Hang Seng Tech Index were 3.9%, -3.7%, -3.8%, -5.4%, and -10.6%, respectively.

A-shares Outlook: Performance Worth Expecting, Focus on Growth and Cyclical Trends

The economy will enter a phase of data and policy verification, making market performance worth anticipating. After the Spring Festival, seasonal trading activity is expected to rebound, laying a foundation for future market performance. Over the next month, the market will undergo intensive data releases and policy validation. A series of economic and financial data for January and February will be gradually disclosed, shaping market expectations for the year’s economy. Overall, March presents more opportunities than risks for equities, making performance promising.

Structurally, focus should be on hot sectors, emphasizing growth and cyclical trends. Currently, we recommend paying attention to these two main themes. Growth benefits from sustained industry enthusiasm and increased risk appetite during the spring rally, with particular focus on recent catalysts in humanoid robots and AI industry chains. Cyclical sectors mainly benefit from strong commodity prices and policy support, so attention should be given to resource commodities and offline service sectors with potential for continued price increases.

Hong Kong Stocks Outlook: Likely to Remain Volatile, Focus on “Barbell Strategy”

Hong Kong stocks may continue to fluctuate, with strong expectations for spring recovery. Divergences center on the pace of earnings realization and foreign capital inflows. Fundamentals: Leading internet companies’ profit recovery has fallen short of expectations, weighed down by external economic conditions. Liquidity: Delayed Fed rate cuts have led to foreign capital outflows, while southbound funds have weakened, and intensive IPOs and large-scale unlockings are significantly draining existing funds. Market: The index structure lags behind global tech hotspots, with extreme sector divergence lacking profit opportunities. Market declines and panic sentiment create negative feedback loops, easily impacted by external factors like US stock volatility. Multiple pressures suggest short-term stability in volatility. Long-term, the core logic for optimism in Hong Kong stocks lies in establishing domestic pricing power, policy dividends, and deep valuation recovery.

In terms of allocation, a “barbell strategy” that resonates with A-shares is recommended. On the defensive side, hold high-dividend sectors as the base; on the offensive side, focus on hard tech growth themes such as semiconductors, AI computing power (especially North American supply chains), and power grids, while also allocating to non-US dollar resources benefiting from a weak dollar. These sectors have core stocks in both A and H shares, enabling cross-market synergy. With ongoing domestic capital inflows and industry policy support, the market is expected to see structural gains in both profits and valuations.

Risk warnings: Policy implementation falling short of expectations; significant deterioration in US-China relations; occurrence of unexpected risk events.

(Source: Everbright Securities)