Core Viewpoint - The article presents a macroeconomic and capital market outlook for 2026, highlighting a stable growth trajectory for the U.S. economy, a cautious recovery in Europe, and potential challenges in Japan, while emphasizing the importance of monetary and fiscal policies in shaping market dynamics [1][2][3]. Economic Outlook - China's GDP growth is projected to reach 4.8% in 2026, driven by stable external demand, improved internal consumption, and price recovery [2]. - Exports are expected to grow by 5% in dollar terms, supported by easing international trade tensions and the resilience of China's industrial chain [2]. - Retail sales are forecasted to rise by 4.5%, bolstered by strong consumer policies, while fixed asset investment growth is anticipated to recover to 1.8% [2]. - Infrastructure and manufacturing investments are expected to grow by 6.5% and 4.6%, respectively, while real estate investment is projected to decline by 13.6% [2]. Fiscal Policy - Fiscal policy is expected to become more proactive, with a target deficit rate maintained at 4.0%, corresponding to a deficit scale of 5.85 trillion yuan [3]. - The total fiscal expenditure is projected to be 43 trillion yuan, an increase of 1.6 trillion yuan from the previous year, with potential for additional tools to be introduced based on economic conditions [3]. Monetary Policy - Monetary policy is anticipated to remain moderately accommodative, with a potential reduction in the OMO rate by 10 basis points to 1.3% and a reserve requirement ratio cut of 50 basis points [3]. - The 10-year government bond yield is expected to rise slightly to 1.8% in 2026, reflecting a balance between long-term growth and risk prevention [3][4]. Capital Market Outlook - The A-share market is expected to continue its upward trajectory, driven by improved corporate performance and favorable liquidity conditions, while the bond market may experience fluctuations with a slight upward trend in yields [4]. - The 10-year U.S. Treasury yield is projected to decline to 4.0%, while the Hong Kong stock market is expected to benefit from a stable liquidity environment and a projected rise in the Hang Seng Index to around 29,000 points [4][5]. Asset Allocation Strategy - The strategy suggests a focus on equities, particularly in technology and growth sectors, while maintaining a defensive position in dividend stocks [6][7]. - The allocation to A-shares is recommended to be increased, while exposure to U.S. dollar bonds is suggested to be reduced [6]. A-share Market Dynamics - The A-share market is expected to experience a "slow bull" phase, with corporate earnings projected to improve, particularly in technology and high-end manufacturing sectors [4][42]. - The anticipated easing of U.S.-China trade tensions may lead to a recovery in export-oriented companies, while the technology sector is expected to remain a key driver of performance [42][48]. Hong Kong Market Insights - The Hong Kong market is projected to continue its slow bull trend, supported by earnings recovery and liquidity expansion, with a focus on dividend stocks as a defensive strategy [76][78]. - The Hang Seng Index is expected to see a valuation uplift, driven by inflows from domestic investors seeking yield in a low-interest-rate environment [76][78].

Economic Outlook - The Chinese economy is expected to grow at a rate of 4.8%, characterized by stable external demand, improved internal demand, and price recovery [2] - Export growth is projected to reach 5%, driven by a marginal easing of international trade tensions and the resilience of China's industrial chain [2] - Retail sales are anticipated to rise to 4.5%, supported by strong consumer policies [2] - Fixed asset investment growth is expected to recover to 1.8%, bolstered by increased fiscal spending and the initiation of major projects [2] - Infrastructure and manufacturing investment growth rates are projected at 6.5% and 4.6%, respectively, while real estate investment is expected to decline by 13.6% [2] Fiscal Policy - Fiscal policy is set to be more proactive, with a target deficit rate maintained at 4.0%, corresponding to a deficit scale of 5.85 trillion [3] - The broad deficit rate is expected to rise to 9.7%, with total fiscal arrangements increasing by 1.6 trillion to 43 trillion [3] - The structure of fiscal spending will focus on "investing in people," optimizing tax structures, and enhancing fiscal sustainability [3] Monetary Policy - Monetary policy is expected to be moderately accommodative, balancing long-term and short-term growth with risk prevention [3] - The OMO rate may be reduced by 10 basis points to 1.3%, and a reserve requirement ratio cut of 50 basis points is anticipated [3] Capital Markets - The domestic stock market is expected to grow, driven by improved liquidity and corporate performance, while the bond market may experience fluctuations [4] - The 10-year government bond yield is projected to rise slightly to 1.8%, while the 10-year U.S. Treasury yield may decrease to 4.0% [4] Foreign Trade - China's exports are expected to maintain resilient growth, with a projected annual growth rate of 5.0% for 2026 [22] - The trade surplus is anticipated to remain high, although its contribution to GDP growth may weaken compared to 2025 [28] Consumption - Retail sales growth is expected to shift from being policy-driven to being led by service consumption and structural recovery, with an anticipated growth rate of 4.5% for 2026 [49] - Service consumption is projected to become a major support force, while durable goods may show signs of demand exhaustion [50] Investment - Real estate investment is expected to decline by 13.6%, with sales volume and value significantly reduced compared to previous years [66] - Infrastructure investment growth is projected to rise to 6.5% in 2026, with a focus on enhancing the quality and efficiency of investments [81] - Manufacturing investment is expected to recover, with a projected growth rate of 4.6% for 2026, supported by improved external demand and policy incentives [95]