Core Insights - The report highlights the significance of the upcoming "Two Sessions" in March 2026, which is expected to influence China's policy direction for the year and the next five years, thereby impacting capital market trends [1] - Historical analysis indicates a "Two Sessions Effect" in A-shares, characterized by pre-session index increases, small-cap outperformance, and excess returns in the TMT sector before and after the sessions [1][2] - The report categorizes years based on total policy expectations, noting that strong expectations lead to significant market impacts, while stable expectations result in structural market trends [2][3] Market Trends - Historically, the A-share index tends to rise in the 20 trading days leading up to the Two Sessions, with an 81% win rate and an average increase of 2.40% [4] - During the sessions, the market experiences uncertainty, leading to a win rate drop to 50%, but post-session, the win rate increases again to 75% with an average increase of 2.44% in the following 20 trading days [4][5] - Small-cap indices, represented by the CSI 2000 and CSI 1000, show significant outperformance before the sessions, with win rates of 80% compared to larger indices [4][5] Sector Performance - The consumer and TMT sectors are expected to perform well, with high win rates and positive returns due to policy announcements and economic targets set during the sessions [4][5] - Specific sectors such as social services, beauty care, and textiles are highlighted for their strong performance before and after the sessions, benefiting from cyclical economic policies [4][5] - The report emphasizes the importance of structural highlights in 2026, particularly in expanding domestic demand and fostering new productive forces, such as commercial aerospace and AI applications [6][7] Policy Focus - The report indicates that the 2026 Two Sessions will focus on structural adjustments rather than aggressive total policy measures, with a notable emphasis on expanding domestic demand and optimizing real estate policies [5][6] - The central government's focus on high-quality development and nurturing new productive forces is expected to shape the market landscape, with significant attention on sectors like commercial aerospace and AI [6][7] Investment Strategy - The report suggests that due to the low probability of exceeding total policy expectations, market movements will be stable, with a focus on price increases and AI-related sectors [8] - Key investment areas include AI and related fields, cyclical sectors like chemicals and construction materials, and emerging industries highlighted in government reports [8]

Group 1 - The core view of the report indicates that the A-share market typically exhibits a calendar effect around the Two Sessions, showing an overall upward trend, with small-cap stocks outperforming large-cap stocks before the sessions and consumer stocks potentially showing stronger price elasticity afterward [2][8][15] - Historical data suggests that during the window period of the first year of each Five-Year Plan, the market is likely to focus on the industrial main lines outlined in the plan, with significant correlations between market performance and financing balance during bull markets [9][10][11] Group 2 - In the week following the Lunar New Year, the A-share market experienced a strong start, led by cyclical sectors, with the CSI 1000 index outperforming other indices, indicating a preference for small-cap stocks [7][8] - The report highlights that the market focus is expected to shift towards policy discussions from the Two Sessions, annual report disclosures, and key events such as the Federal Reserve's meetings and Sino-US relations [7][8] - The report identifies four main investment themes aligned with the "15th Five-Year Plan," including technological innovation, national security, resource management, and consumer services, which are expected to benefit from policy support [11][20]