Market Overview - The market experienced narrow fluctuations with rapid rotation of hotspots, resulting in a rise of over 2% in the micro-cap stock index. More than 3,500 stocks in the two markets closed in the green [1] - The overall market is still in a "gap-filling" phase with a short-term improvement in risk appetite, suggesting a potential shift towards growth sectors after the holiday [1][8] Sector Performance - Chip stocks showed a rebound, with leading stock Zhaoyi Innovation hitting the daily limit of 20% increase. The automotive supply chain surged, particularly in components, with Jingjin Electric also hitting the daily limit [1] - The chemical sector strengthened, led by pesticides and disperse dyes, with Hongqiang Co. achieving six consecutive daily limits. The humanoid robot sector also saw gains, with multiple stocks hitting the daily limit [1] - The computing power industry continued its rebound, with Hongbo Co. achieving three consecutive daily limits. Other sectors like pharmaceuticals and consumer electronics also performed well [1] Individual Stock Movements - A total of 3,557 stocks rose while 1,674 fell, with 76 stocks hitting the daily limit and 62 stocks hitting the lower limit. The Shanghai Composite Index closed down 0.05% at 3,286.65 points, with a trading volume of 430.9 billion yuan [2] - Main funds focused on accumulating stocks in the automotive parts, general equipment, and black home appliances sectors, with notable net inflows into stocks like Liou Co., Sichuan Changhong, and Bochuang Technology [3] Policy and Regulatory Developments - The Hong Kong Stock Exchange and the Hong Kong Securities and Futures Commission are preparing to assist "Chinese concept stocks" wishing to return to the Hong Kong market, with adjustments to listing requirements and processes to attract more companies [4] - The National Development and Reform Commission announced the second batch of 81 billion yuan in ultra-long-term special government bond funds to support the consumption of old goods, indicating strong market demand for such initiatives [5] Economic Outlook - Huatai Securities suggests that the market may maintain a volatile pattern before the holiday, with a focus on fundamental insights post-earnings disclosures. The emphasis remains on policy and domestic responses as the main trading themes [7] - Oriental Securities indicates that the market style may shift towards growth after the holiday, recommending sectors with policy catalysts and certainty in Q1 earnings, such as banking, electricity, and automotive [8]

Core Views - The A-share market is experiencing a significant expansion driven by policy, with the Shanghai Composite Index breaking through the 3400-point level, indicating a potential for continued market recovery and optimism regarding foreign capital inflow [1][2] - In March, the market's risk appetite is expected to rise, supported by positive signals from the National People's Congress and the expectation of a recovery in the real economy, although potential disturbances may arise in April due to factors like earnings disclosures [2][3] - There is a shift in market pricing power towards allocation-type funds, with an increased effectiveness of fundamental factors, suggesting a focus on core assets in sectors like midstream manufacturing, consumer goods, and real estate chains [3][4] Market Dynamics - The market is witnessing a transition from a broad technology focus to core asset appreciation, with short-term strategies favoring low-positioned sectors showing signs of improvement, particularly in midstream manufacturing and consumer goods [5][6] - The relative valuation of the CSI 300 versus the CSI 2000 has fallen to its lowest level since 2017, indicating potential for small-cap growth stocks to catch up [4][5] - Allocation-type foreign capital is likely to seek out low-positioned fundamental opportunities, with recent data indicating a shift towards sectors benefiting from economic recovery [4][5] Sector Focus - Key sectors to watch include engineering machinery, batteries, and consumer goods, which are expected to benefit from the ongoing recovery and demand for core assets [5][6] - The report highlights that the basic improvement signals are concentrated in manufacturing sectors such as engineering machinery, batteries, and photovoltaic industries, as well as consumer goods benefiting from price increases [4][5] - The report suggests that mid-term strategies should continue to focus on the broader technology sector while monitoring key events like Tencent's earnings and the GTC conference for further insights [5][6]

Investment Rating - The report maintains an "A" rating for the new materials industry, indicating a positive outlook for the sector [1]. Core Insights - The chemical raw materials sector is currently experiencing a bottoming phase, with a slowdown in capacity expansion and a potential alleviation of intense competition and price wars. The overall profit margin for the industry is expected to remain between 3% and 5% in 2024, which is at a historical low. However, with the central economic work conference emphasizing the need to address "involution" competition, there is potential for improved industry order and profit recovery [1][34]. Summary by Sections 1. Market Performance and Valuation - The new materials index has shown significant volatility, underperforming the Shanghai Composite Index by 10.6% as of December 27, 2024. The index's performance was particularly weak in the first three quarters of 2024 but saw a recovery in the fourth quarter due to favorable policies [15][20]. 2. Focus Areas 2.1 Supply and Demand Dynamics - The vitamin sector is expected to maintain high prices for Vitamin E due to limited supply recovery from BASF's production facilities, which are aging and unable to meet demand. The report suggests monitoring companies like New Hope Liuhe and Zhejiang Medicine [42][59]. - The renewable energy materials sector is projected to benefit from a stable increase in wind power demand, with a significant rise in installed capacity and a self-regulatory agreement among wind turbine manufacturers to mitigate price competition. Companies like Times New Material and Mega Chip Color are highlighted for investment [44][60]. 2.2 Emerging Industry Opportunities - The bio-manufacturing sector is positioned for growth, particularly in synthetic biology and sustainable aviation fuel (SAF). The report emphasizes the importance of product selection and platform capabilities for companies in this space, recommending firms like Huaheng Biological and Meihua Biological [48][50]. - The special coatings market is expected to grow due to increasing military expenditures and the need for stealth materials. Companies such as Huaqin Technology and Jiachih Technology are noted for their potential in this area [52][61]. - The semiconductor materials sector is anticipated to benefit from the recovery of consumer electronics and AI applications, with a focus on domestic production capabilities. Companies like Stik and Aisen are recommended for investment [56][61]. - The humanoid robotics market is projected to drive demand for PEEK materials, with domestic companies expected to gain market share due to cost advantages. The report suggests monitoring firms like Zhongxin Fluorine Materials and Zhongyan Co. [58][61].