Two main themes capture the "Red Envelope Market" trend

1. Major Global Assets Rise During Holiday Period, AI and Resources Become Focus

During the Spring Festival holiday, amid the global liquidity expectation correction, geopolitical tensions, and tariff fluctuations, major assets experienced gains. On one hand, global asset prices are still adjusting from the previously overly pessimistic liquidity expectations caused by Wash’s signals, combined with dovish signals from officials like Hasket, driving major stock indices and precious metals to continue their recovery; on the other hand, renewed tensions in Iran’s geopolitical situation pushed oil prices sharply higher. The tariff dispute at the end of the holiday added new logic to global asset prices. After the U.S. Supreme Court ruled IEEPA tariffs illegal, global assets responded first to the effective reduction of tariffs and the positive impact of the shrinking administrative powers of Trump, with equities and precious metals—“weak dollar assets”—strengthening.

Structurally, AI and resources remain the two main focal points in the global market, but their guidance for asset performance differs:

In AI, trading is increasingly differentiated. Behind this is the significant increase in capital expenditure by tech giants and rapid improvements in large model capabilities. Investors are shifting from earlier frenzied “undifferentiated valuation boosts” to rational considerations of application commercialization and the sustainability of traditional business models. Recently, a series of rapid advancements in large models domestically and abroad confirm AI’s disruptive impact on the world and trigger concerns about the sustainability of traditional business models. In capital markets, the global software and fintech sectors are under significant pressure, and the post-holiday correction in Hong Kong internet stocks also reflects worries about AI replacing traditional internet business models; meanwhile, market valuation of AI-related companies increasingly emphasizes product strength and commercialization ability, leading to divergence in stock performance between giants like Google and Microsoft in the U.S., and new large model and humanoid robot companies in Hong Kong versus traditional internet firms.

For resources, under the intensive catalysis of global macro narratives such as geopolitics and tariffs, investor consensus is further consolidating, forming another major theme outside of technology. Since the beginning of the year, a weak dollar has been the dominant logic supporting global asset prices, benefiting resource commodities, with international commodity prices soaring and resource sector stocks rising in tandem. More importantly, under the global narrative of Trump’s unpredictable policies and geopolitical turbulence, resource allocation is increasingly endowed with stronger currency credibility and medium-to-long-term strategic logic. The recent escalation of Middle East tensions and global tariff uncertainties further reinforce this logic, likely strengthening investors’ strategic resource allocation consensus.

2. Continued Optimism for a New Uptrend in A-shares

For A-shares, we believe that after adjusting with overseas assets before the holiday, the market has already priced in certain risks. Post-holiday, A-shares are entering a high-probability window, supported by the U.S. Supreme Court ruling on tariffs and the scheduled visit of Trump to China, which boost risk appetite. The intensive catalysts at the macro and industrial levels provide clear guidance for structure, and we remain optimistic about a new upward cycle in A-shares.

First, A-shares will enter a high-probability window after the holiday. Post-Chinese New Year, with rising risk appetite and increased capital inflows, coupled with expectations for the Two Sessions policies, major indices’ success rates are significantly improving. A-shares are poised to enter a period of higher success probability for the year.

Second, the U.S. tariff ruling and Trump’s scheduled visit to China will support domestic risk appetite. In the short term, after the abolition of IEEPA tariffs, although Trump plans to reimpose a 15% tariff on 122 items, the effective tariff rates on countries like China and Vietnam (20%) and Cambodia (19%) remain overall lower, benefiting export-oriented companies with large U.S. revenue exposure and extensive capacity or trade re-exports in ASEAN. In the medium to long term, while Trump may seek alternative tariff tools, the speed, scope, and flexibility of tariff enforcement are expected to decline after the IEEPA ruling. The scheduled visit and approaching mid-term elections create a relatively controlled environment for U.S.-China tariff volatility.

Furthermore, we believe that for asset prices, a more important long-term narrative change is the restriction of Trump’s administrative powers. The Supreme Court’s 6:3 ruling mainly impacts U.S. politics, endorsing the contradiction between the executive and legislative branches, and negating Trump’s expansion of executive authority. A contraction of executive power could further empower anti-Trump forces at local and congressional levels, increasing policy uncertainty. Under this political influence, emerging markets, precious metals, and basic metals—“weak dollar assets”—stand to benefit more.

Third, for the two major themes of AI and resources with high global consensus, domestic factors will also add alpha, further supporting the structural evolution of A-shares after the holiday.

In AI, the “going viral” of robots and large models on the Spring Festival Gala stage marks a key turning point from “concept” to “real-world application,” greatly boosting confidence in domestic AI commercialization this year. Multiple domestically produced humanoid robots showcased impressive movements and scene applications, confirming that domestic humanoid robots now possess excellent motion control and real-world deployment capabilities. This accelerates societal recognition and acceptance. With ongoing breakthroughs in core technologies and faster scene deployment, 2024 is likely to be the year of mass production and commercialization of humanoid robots both domestically and internationally. Recently, ByteDance’s Seedance 2.0 large model debuted in the Gala’s visual customization for shows like “Celebrating the Flower God,” “Wind Riding Song,” and “Happy Little Pony,” marking its first public application and demonstrating significant multimodal capabilities. This indicates that domestic AI applications are transitioning from model deployment to scene monetization, from concept to performance, with model iteration and scene integration resonating.

In resources, besides the continued enhancement of strategic value through global macro narratives, the domestic new price cycle is also providing additional clues for price increases. Looking ahead, March and April are key windows for domestic price verification and trading, as price increase signals accumulate. As price increases become an important driver of profit recovery and market style shifts, they may become a core trading theme:

First, the post-holiday peak season for industrial activity will be an important window to verify price increases. Traditionally, China’s two peak seasons are “March-April” and “September-October,” when industrial production, infrastructure projects, and real estate sales are most active, creating favorable supply-demand conditions and facilitating price increase signals. Historical data shows that during these peak periods, the number of sub-sectors experiencing price hikes also increases. Past inflation cycles have seen PPI accelerate mainly in Q1.

Second, March and April are typically when market sentiment about macro conditions and optimism for cyclicals are at their best, providing favorable timing for price increase trades. Each year, in March and April, China’s high-frequency economic activity indices and Citibank’s China Economic Surprise Index tend to rise seasonally. This is partly due to policy signals from the Two Sessions accelerating macro policy implementation, fostering optimistic economic expectations, and partly because the spring peak season validates these expectations through high-frequency data. This makes March-April an ideal window for price increase trades driven by macro optimism.

More importantly, March-April will be a critical period for market opportunities based on economic cycles. Since price increases are currently the most direct way to improve corporate profitability, they are likely to become a core theme for sector rotation. Based on our industry rotation strength index’s seasonality, after the risk appetite-driven and highly consensus phase in February, the market structure will gradually shift toward rotation and diffusion in March and April, with stock prices increasingly correlated with earnings. Currently, there is no better logic than price increases to directly improve corporate profits. Therefore, March-April will not only be a key window to verify the impact of price increases on profits and market style but also a period when price increases are likely to be a core indicator for identifying cyclical opportunities.

3. Calendar Effects and Subsequent Catalysts: Focus on AI and Resources Post-Holiday, with Some Overseas Chains Also Worth Watching

In terms of relative success probability, technology manufacturing and resource & infrastructure chains outperform after the holiday. On one hand, the rise in risk appetite post-holiday favors growth sectors represented by TMT and advanced manufacturing; on the other hand, with the “Golden March and Silver April” spring peak season and policy implementation after the Two Sessions, the subsequent period will be crucial for further price increase signals, providing support for resource and infrastructure sectors.

In technology manufacturing, focus remains on “pan-AI assets,” especially on infrastructure for computing power and commercialization applications. Considering current congestion, year-to-date gains and catalysts:

• Computing infrastructure: Nvidia’s performance may be catalyzed by optical modules, data center infrastructure (energy storage, power grids), global storage price increases (storage leaders, upstream equipment testing), and domestic large model iterations causing a shortage of domestic computing power (domestic semiconductor supply chain).

• Commercial applications: humanoid robots, autonomous driving, consumer electronics (potentially catalyzed by Apple’s shareholder meeting), and multimodal capabilities benefiting gaming, marketing, and entertainment industries.

In resources, March-April is a key window for domestic price verification and trading. If PPI continues to show signs of price improvement, the positive impact of domestic price increases on resource stocks warrants further attention. We analyzed the correlation between PPI and stock prices across primary and secondary industries since 2005, finding that industries like chemicals, steel, building materials, petrochemicals, nonferrous metals, and coal show the strongest positive correlation.

However, given that the current price increases driven by supply-demand improvements are more structural, the most sustainable areas are likely to remain in midstream materials and manufacturing. The core logic of price increases is supply-demand gaps. Sectors with existing supply-demand gaps are more likely to sustain price rises. In the current cycle, gaps first appeared in emerging industries and “anti-inflation” beneficiaries such as midstream materials (chemicals, steel, building materials) and midstream manufacturing (TMT, high-end manufacturing). Downstream consumer manufacturing related to domestic demand remains balanced, while upstream resources related to real estate still face oversupply. The most sustainable price increases are expected to be in midstream materials and manufacturing, with opportunities in upstream resources and downstream consumption still dependent on subsequent supply-demand improvements.

Finally, pay attention to the recovery opportunities in export chains after tariffs decline. Industries with large U.S. revenue exposure, such as light industry, home appliances, consumer electronics, batteries, auto parts, and medical devices, especially those with significant capacity in ASEAN regions previously subject to high tariffs or trade re-exports, will benefit most from tariff reductions.

Risk Warnings

Economic data volatility, policy easing below expectations, Federal Reserve rate cuts less than anticipated, etc.

Source: Yao Wang Hou Shi

Risk warning and disclaimer

Market risks exist; investments should be cautious. This article does not constitute personal investment advice and does not consider individual user’s specific investment goals, financial situation, or needs. Users should evaluate whether the opinions, views, or conclusions herein are suitable for their circumstances. Investment is at their own risk.