Everbright Securities: A-shares performance is worth expecting; 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 sector performance clearly differentiated. The comprehensive index, building materials, and national defense and military industries led the gains. Influenced by positive market sentiment and sustained high risk appetite, most major A-share indices increased by February 26. The CSI 1000 had the largest gain, rising 2.9% for the month, while the STAR 50 experienced the largest decline, falling 1.6%.

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 were 3.9%, -3.7%, -3.8%, -5.4%, and -10.6%, respectively.

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

The economy will enter a phase of data and policy validation, making market performance promising. 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 verifications. A series of economic and financial data from January and February will be gradually disclosed, shaping the market’s expectations for the year’s economy. Overall, March presents more opportunities than risks for equities, making performance worth looking forward to.

Structurally, focus on hot sectors and two main themes: growth and cyclical recovery. Currently, we recommend paying attention to these themes. Growth benefits from sustained industry enthusiasm and increased risk appetite during spring rallies, with particular focus on sectors like humanoid robots and AI supply chains, which have recent catalytic events. Cyclical recovery is mainly driven by strong commodity prices and policy support, so resources and offline service sectors with potential for continued price increases are worth attention.

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

Hong Kong stocks may stay volatile, 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 outflows of foreign capital, while southbound funds have weakened, and intensive IPOs and large-scale lock-up expirations are significantly draining existing funds. Market structure: The indices lag behind global tech hotspots, with extreme sector divergence lacking profit opportunities. Market declines and panic emotions create negative feedback loops, easily impacted by external factors like US stock volatility. Multiple pressures suggest short-term stability in a volatile range. Long-term, the core logic for optimism in Hong Kong stocks lies in establishing domestic pricing power, policy dividends, and deep valuation repairs.

In terms of allocation, a “barbell strategy” that resonates with A-shares is recommended. Defensive: allocate to high-dividend sectors as the base. Offensive: focus on semiconductor equipment, AI computing power (especially North American supply chains), power grids, and other hard tech growth themes, while also including 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 earnings and valuations.

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

(Source: Everbright Securities Research)