Zheshang Strategy: Style Shift to Growth "Rotation" Continue to be Bullish, Moderate Structural Adjustment

Key Points

This week’s market continued to “cool down,” with clear signs of style rotation. Looking ahead, after three weeks of strong performance, the technology growth sector has “followed” the rhythm of the major indices and entered a high-level consolidation; meanwhile, the recently strongest non-ferrous resources sector has experienced two-way fluctuations amid broad swings in global resource commodities. We believe that the spring offensive launched early in mid-December last year and the continuous rise of the technology growth and resource sectors have come to an end. The market is likely to enter a relatively strong oscillation pattern before the Spring Festival of the Year of the Horse. Regarding allocation, based on the judgment of “style rotation with growth taking a休息, and a strategic outlook favoring short-term volatility,” we suggest: in terms of timing, medium-term positions should not fear short-term fluctuations and remain optimistic about a “systematic slow bull,” but with moderate control over portfolio flexibility. Regarding style, considering that the previous “small strong, large weak” pattern has ended, adjustments can be made by moderately shifting from CSI 1000 and CSI 2000 towards CSI 300 and CSI 500. Industry-wise, focus on the brokerage sector, which has limited downside and considerable upside potential, especially as key time nodes approach; also pay attention to some bank stocks trading above their annual lines, and social services stocks with good technical patterns and relatively low positions. Additionally, Hong Kong stocks have gained less during this rally; if suitable pullback opportunities arise, increased attention can be given.

Content Summary

1. Weekly Market Overview (2026-01-26 to 2026-01-30)

(1) Major indices: The market continued to “cool down,” with obvious signs of style rotation.
(2) Sector observations: Resources showed a value rebound, while technology growth experienced a clear correction.
(3) Market sentiment: Trading volumes across both markets significantly increased, and most stock index futures traded at a premium.
(4) Capital flows: Margin buying share slightly declined, and stock ETFs experienced net outflows.
(5) Quantitative “black technology”: Major indices have moderate to high valuations, while the ChiNext Index’s valuation remains relatively low.

2. Weekly Market Attribution

(1) The Federal Reserve announced to keep interest rates unchanged at the January meeting;
(2) International precious metal prices continued to rise, boosting bullish sentiment in non-ferrous metals.

3. Next Week’s Market Outlook

With the clear style rotation this week, the technology growth sector, after three weeks of strong performance, has “followed” the major indices into high-level consolidation; meanwhile, the recently strongest non-ferrous resource sector has experienced two-way fluctuations amid broad global resource commodity swings. We believe that the spring offensive launched early in mid-December last year and the “fast lane” of continuous rises in the technology growth and resource sectors have ended. The market is likely to enter a relatively strong oscillation pattern before the Spring Festival of the Year of the Horse. Since small- and mid-cap technology growth and cyclical styles have already gained significant ground, we expect further “high to low” rotations after this week’s style shift. However, considering current market sentiment, liquidity, and domestic and international situations, we believe that the “systematic slow bull” remains intact, and the quarterly outlook remains optimistic. Additionally, from a technical perspective, the brokerage index may reach a turning point next Wednesday; as a heavily lagging and potentially high-rebound sector, its trend warrants attention. For recently volatile sectors like food & beverages and real estate, these are short-term pulses rather than medium-term allocation opportunities.

Regarding allocation, based on the judgment of “style rotation with growth taking a休息, and a strategic outlook favoring short-term volatility,” we suggest: in terms of timing, medium-term positions should not fear short-term fluctuations and remain optimistic about a “systematic slow bull,” but with moderate control over portfolio flexibility. Regarding style, considering that the previous “small strong, large weak” pattern has ended, adjustments can be made by moderately shifting from CSI 1000 and CSI 2000 towards CSI 300 and CSI 500. Industry-wise, focus on the brokerage sector, which has limited downside and considerable upside potential, especially as key time nodes approach; also pay attention to some bank stocks trading above their annual lines, and social services stocks with good technical patterns and relatively low positions. Additionally, Hong Kong stocks have gained less during this rally; if suitable pullback opportunities arise, increased attention can be given.

4. Risk Warning

Domestic economic recovery may fall short of expectations; geopolitical uncertainties remain.

(Source: Zheshang Securities)