Zhongtai Strategy: How to Balance Offense and Defense During the "Two Sessions" Window for Global HALO Trading

Last week, global markets experienced a significant increase in divergence. In the U.S. stock market, NVIDIA reported Q4 revenue of $68.1 billion for fiscal year 2026, up 73% year-over-year, with all metrics exceeding market expectations, but the stock closed lower. The core reasons for the market’s “sell the facts” approach include diminishing marginal effects under high growth rates and unclear return paths on capital expenditures; additionally, after Trump vetoed its reciprocal tariff policy in the Supreme Court, he announced an increase in global tariff rates to 15%, reigniting trade policy uncertainty, which pressured the Nasdaq throughout the week.

In contrast, the A-share market showed a clear warming trend in overall sentiment during the first week after the holiday, with technology sectors showing differentiation. From a style perspective, mid-cap and small-cap sectors more sensitive to policy expectations performed relatively better. The CSI 1000 and CSI 500 indices both gained over 4% during the week. The computing industry chain, electricity, commercial aerospace, and cyclical resource sectors were active in turn, supported by a strengthening RMB exchange rate.

However, it’s important to note that under the dominant narrative of “AI swallowing applications,” sectors like software and Hang Seng Tech faced significant impacts. The global HALO trading strategy became the main direction led by foreign investors, resonating with the A-share market.

Looking ahead, the influence of policies from the Two Sessions, geopolitical tensions in the Middle East, and the divergence in performance between AI hardware and applications are the most noteworthy market signals for next week.

1.

Technology and Resources: What is the driving logic of their resonance?

This week’s dual rally in technology and resources appears to be a simple rotation between two directions on the surface, but fundamentally it reflects the same market logic—“one body, two sides.” The former corresponds to the industry prosperity logic driven by “AI boosting demand for computing power and electricity, accelerating domestic substitution,” while the latter relates to “PPI rebound, implementation of anti-inflation policies, and global resource re-pricing,” representing cyclical recovery.

In resource sectors, externally, the escalation of US-Iran tensions pushed international oil prices up by over 5% during the holiday, while repeated disruptions to Trump’s tariffs reinforced market re-pricing expectations for resource security. Geopolitical risks provided direct catalysts. Internally, domestic PPI continued to rise month-over-month, with the effects of supply-side “anti-inflation” policies gradually evident. Fundamentals in steel, non-ferrous metals, and chemicals sectors are becoming more solid. The combination of these factors, along with global capital shifting towards heavy assets, led to strong performance in steel, non-ferrous metals, rare earths, and basic chemicals—this is the logical extension.

In technology sectors, internal differentiation is evident, with computing hardware and storage being the true main themes this week. In storage, SK Hynix disclosed that DRAM and NAND inventories are only about four weeks’ worth, further strengthening the full-year price increase expectations, with domestic storage substitution logic heating up simultaneously. In contrast, AI applications and large model concepts retreated sharply due to lack of performance validation, resulting in a structural divergence within the tech sector—strong hardware, weak applications.

From the underlying logic, the dual rally in technology and resources is not merely a style rotation but points to the same core narrative—improving corporate profitability. The former aligns with industry prosperity driven by AI computing power expansion and domestic substitution acceleration; the latter relates to cyclical recovery driven by PPI rebound and supply contraction. Both main lines are supported by fundamentals.

Meanwhile, discussions on the “14th Five-Year Plan” draft at the Politburo meeting and policy expectations ahead of the Two Sessions provide additional support to overall market risk appetite.

2.

Two Sessions policy expectations: “Structural optimization” rather than “strong stimulus”

Historical experience shows that the period from the Spring Festival to the Two Sessions is often the most concentrated window for policy expectations throughout the year, with relatively high market upward certainty, driven mainly by stable growth and proactive structural policies. As the Two Sessions are scheduled for next Wednesday and Thursday, policy signals are expected to become clearer.

Based on current policy statements and recent signals from authoritative media, the tone emphasizes “stabilizing expectations, preventing risks, and improving quality,” rather than short-term aggregate expansion through large-scale stimulus.

Fiscal and real estate policies are expected to maintain strong resolve. Given that real estate remains in a deleveraging and risk-clearing phase, the focus will be on preventing systemic risks and promoting affordable and structural support, rather than fully restarting the property cycle. Fiscal policy will also prioritize efficiency and sustainability, optimizing expenditure structure and strengthening performance management to improve fund utilization, rather than simply expanding deficits.

Under this framework, macro liquidity is expected to remain reasonably ample, but the likelihood of significant increases in total policy measures is relatively low. The policy approach will lean more toward “structural optimization” rather than “strong stimulus.”

3.

On the structural front, technological innovation remains a clearly emphasized policy direction. Recent articles in Qiushi magazine, such as “Key Tasks in Current Economic Work,” propose implementing a new round of high-quality development initiatives for key industrial chains, promoting transformation and upgrading of traditional industries, and cultivating emerging pillar industries like integrated circuits, aerospace, and biomedicine, as well as future energy and embodied intelligence.

From a policy logic perspective, this is aimed at strengthening industrial security and independence amid complex external environments, and at counteracting the weak endogenous growth momentum through technological progress and industrial upgrading. During the Two Sessions, continued support in terms of fiscal measures, industrial funds, tax incentives, and financial tools for technological innovation is expected, making related fields a focus for medium-term policy resource allocation.

4.

It is worth noting that the market-oriented reform of utility pricing may accelerate. From a capital market perspective, sectors like power, gas, water, and heating have stable profit models. If pricing mechanisms are streamlined and return expectations improve, valuation systems could be reshaped. Coupled with state-owned enterprise reforms and increased share of profits allocated to state capital, these sectors may become a “risk prevention mainline” with both stability and reform flexibility.

5.

Investment outlook: Continued differentiation, with both offensive and defensive opportunities

1. The prosperity of the tech sector remains, but differentiation continues. Fields such as AI, robotics, energy storage, and commercial aerospace are experiencing a policy support, technological breakthroughs, and scenario implementation resonance, making them suitable for medium-term allocation. However, valuations of AI applications and large models have been overly priced based on policy expectations, and without performance validation, short-term risks of chip selling pressure exist.

2. In comparison, infrastructure related to computing power (optical communications, liquid cooling, storage) has more solid fundamentals, with verifiable orders and prosperity data. Commercial aerospace, catalyzed by the “14th Five-Year Plan,” also supports this. If the government work report during the Two Sessions further emphasizes “AI+,” AI application sectors could see a recovery rally—worth关注。

3. The logic for resource and utility sector allocation is likely to strengthen next week. The escalation of Middle East tensions over the weekend has reinforced safe-haven narratives around precious metals. Meanwhile, the RMB appreciation trend continues, and blue-chip equities valuations are expected to rise. If the government work report emphasizes expanding domestic demand and stabilizing growth more than expected, cyclical resource sectors such as non-ferrous metals, chemicals, and steel could benefit directly, with further confirmation of price increase logic.

4. In utilities, sectors like power combine real demand growth driven by AI computing expansion with expectations of price mechanism reforms. As market styles tend to balance, their defensive and reform attributes are worth noting.

Overall, under the backdrop of steady total policies and strengthened structural policies, the market may continue to show a pattern of structural differentiation. A strategy focusing on “tech offensive and utility stability” is recommended to seize phased opportunities during policy windows.

6.

Microstructure observations for this week (Feb 23–27, 2026)

6.1 Broad market index performance

The market rose overall this week, with the CSI 1000 and CSI 500 indices gaining significantly—4.34% and 4.32%, respectively. The SSE 50 index rose modestly by 0.17%. Style-wise, mid-cap sectors performed better, while large-cap sectors faced pressure.

6.2 Market activity and risk appetite tracking

Market activity increased this week. By Thursday, margin financing balance reached 2.65 trillion yuan, up 22.1 billion yuan from the previous week, accounting for about 2.03% of the total market capitalization of all A-shares. Over the past five trading days, margin buy-ins accounted for approximately 9.8% of total turnover, up 0.75 percentage points from five days earlier.

Market risk appetite improved this week. The PE_ttm of the CSI 300 was 14.13x, up 0.12x from last week, in a relatively high historical percentile (83.90% over 10 years); risk premium was 5.29%, down 0.05, in a mid-range historical percentile (53.30%).

6.3 Sector turnover and valuation changes

Most sectors saw decreased turnover rates this week, with environmental protection, utilities, and petrochemical sectors showing increased crowdedness. Major sector turnover rates declined notably in computer, social services, and media sectors—down 3.28%, 3.94%, and 17.93%, respectively. Conversely, environmental protection, utilities, and petrochemicals saw increased crowdedness.

Sector valuations mostly rose, with defense, steel, and non-ferrous metals experiencing significant PE increases—up 4.96, 4.17, and 3.19 times, respectively. Conversely, food & beverage, retail, and media sectors declined sharply—down 0.33, 0.83, and 2.65 times.

In relative positioning, electronics, computing, and real estate sectors have PE ratios at historically very high levels (above 98% in 10-year percentile). Conversely, agriculture, forestry, animal husbandry, fishery, and non-bank financials, as well as food & beverage, have PE ratios at relatively low levels (below 25% in 10-year percentile).

In terms of PB, sector differentiation is pronounced. Mechanical equipment, communications, and defense sectors have PB percentile ranks above 99%, at the highest levels in the past decade; meanwhile, biomedicine, banking, and food & beverage sectors have low PB percentile ranks, with food & beverage below 5%, at historically very low levels.

Risk warning: Unexpected tightening of global liquidity, increased market complexity, and unpredictable policy change rhythms.