Core Insights - Eastern European and Soviet-related funds and stocks are influenced by geopolitical events, capital flows, and resource market dynamics [1] Recent Events - The European Council reached an agreement on February 4, 2026, to provide a legal framework for a €90 billion loan to Ukraine for the 2026-2027 period, with the first disbursement expected in early Q2 2026, potentially boosting economic recovery and infrastructure investment in Ukraine and the surrounding Eastern European region [2] Industry Policies and Environment - Since September 2025, the introduction of a nationalization fast-track procedure in Russia has increased the risk of asset confiscation for Western companies, such as Raiffeisen Bank and UniCredit, affecting their local operations and adding to geopolitical uncertainty, which may lead to stock price volatility for international companies with exposure in Russia [3] Capital Flows - Recent data shows strong inflows into European equity funds, attracting approximately $14 billion in net investments for the week ending February 9, 2026, marking a new high in several months, driven by investors seeking to diversify away from reliance on U.S. tech stocks towards markets including Eastern Europe. Additionally, large asset management firms like Amundi are reducing their dollar asset holdings and increasing allocations to Europe and emerging markets [4] Sector Changes - Following the Russia-Ukraine conflict, nickel prices experienced a historic surge, and a "treasury plan" for the resource sector received $1.67 billion in oversubscriptions in early February 2026, indicating investor interest in resource-related assets in Eastern Europe, which may impact fund allocations in the metal mining sector [5] Future Developments - Due to heightened tensions in U.S.-European relations, European defense expansion plans are expected to accelerate, potentially leading to an increase in sovereign bond issuance. If the European Central Bank does not restart bond purchases, upward pressure on long-term interest rates may affect the valuations of military and security-related industries [6]

Core Viewpoint - The article discusses the significant market changes observed before and after the Chinese New Year, highlighting a pattern of style rotation between growth and value stocks, as well as large-cap and small-cap stocks over the years [1][2][4]. Group 1: Market Trends - Historical data from 2010 to 2025 shows that out of 16 instances, 50% experienced a switch from value to growth styles, while 37.5% saw a switch from growth to value [2]. - In the same period, 68.75% of the years had a transition from large-cap to small-cap stocks, indicating a consistent trend in market behavior [2]. Group 2: Performance Metrics - According to East Wu Securities, the excess return of the small-cap index relative to the large-cap index averaged 4.1% and 6.0% over 5 and 10 trading days post-holiday, respectively [4]. - The market sentiment index constructed by East Wu Securities indicates a stark contrast in trading behavior, with a 100% win rate in the days following the holiday compared to only 33% and 25% in the days leading up to it [4]. Group 3: Fund Flow Analysis - Data from 2011 to 2025 reveals that financing funds typically see a net outflow of 574 billion yuan in the 20 trading days before the holiday, followed by a net inflow of 624 billion yuan in the 20 trading days after [5]. - The behavior of northbound funds shows a pattern of net buying before and after the holiday, but a significant drop in net buying occurs in March [5].

Group 1 - International gold and silver prices experienced significant declines on February 5, with silver futures dropping over 9% and gold futures falling more than 1% [1][2] - Silver prices reached historical highs on January 29, with spot and futures prices hitting 121.647 and 121.785 respectively, but have since seen volatility [2] - The European Central Bank and the Bank of England both decided to maintain their key interest rates, contributing to the lack of support for the gold market [2] Group 2 - The current silver price trends are primarily driven by capital flows rather than physical fundamentals, leading to increased volatility compared to gold [3] - Speculative capital inflows and thin over-the-counter trading have amplified price fluctuations in the silver market [3] - Canadian Imperial Bank of Commerce predicts average gold prices to reach $6,000 per ounce and silver prices around $105 per ounce this year, citing geopolitical uncertainty and a weakening dollar as supporting factors for gold prices [3]

Group 1 - The article highlights a significant decline in the prices of non-ferrous metal stocks, with Tianqi Lithium Industries (002466) dropping by 12.73% to HKD 43.2, and other companies like Minmetals Resources (01208) and Jiangxi Copper (600362) also experiencing notable losses [1][1][1] - On February 5, the international precious metals market saw a downturn, with spot gold falling below USD 4,800 per ounce and spot silver experiencing a drop of 15%, falling below USD 75 [1][1][1] - Domestic commodity futures markets reflected this trend, with lithium carbonate futures hitting a daily limit down and copper futures dropping nearly 4% [1][1][1] Group 2 - According to a report from Guotai Junan Securities, the gold and silver markets are expected to become increasingly volatile, influenced by long-term factors such as the credibility of the US dollar and shifting asset preferences [1][1][1] - The report suggests that the frequency of global black swan events may lead to a temporary reduction in risk appetite, alongside rising inflationary pressures in the US that could tighten interest rate expectations [1][1][1] - It is noted that the historical volatility of gold and silver may also manifest in other major asset classes [1][1][1]

Group 1 - The article highlights a significant decline in the prices of various metal stocks, with Tianqi Lithium Industries (09696) dropping by 12.73% to HKD 43.2, and other companies like Minmetals Resources (01208) and Jiangxi Copper (00358) also experiencing notable losses [1][1][1] - On February 5, the international precious metals market saw a downturn, with spot gold falling below USD 4,800 per ounce and spot silver experiencing a drop of 15%, falling below USD 75 [1][1][1] - The domestic commodity futures market reflected this trend, with lithium carbonate futures hitting a daily limit down and copper futures dropping nearly 4% [1][1][1] Group 2 - According to a report from Guotai Junan Securities, the gold and silver markets are expected to become increasingly volatile, influenced by long-term dollar credit dynamics and shifting asset preferences [1][1][1] - The report suggests that the frequency of global black swan events is leading to a temporary reduction in risk appetite, while rising inflationary pressures in the U.S. are tightening expectations for interest rate cuts [1][1][1] - The potential for a confluence of these factors may lead to significant historical volatility in gold and silver, which could also affect other major asset classes [1][1][1]

Market Performance - Emerging markets saw a narrowing increase last week, with MSCI global index up by 0.2%, MSCI developed markets flat at 0.0%, and MSCI emerging markets up by 1.4% [1] - In the bond market, the U.S. 10Y Treasury yield experienced the largest increase, while commodities like oil surged and gold and silver saw notable pullbacks [1] - The global energy sector showed consistent growth, with Chinese stocks performing strongly in cyclical sectors, and utilities and communications in Europe and the U.S. outperforming [1] Trading Sentiment - Global market trading volume increased last week, with major indices experiencing higher volatility [1] - A/H/U.S./European/Japanese stock trading volumes rose, while Korean stock trading volume decreased [1] - Investor sentiment in Hong Kong improved and reached historical highs, while U.S. investor sentiment also remained at historical highs [1] - Volatility increased across Hong Kong, U.S., European, and Japanese stocks, while U.S. Treasury bond volatility decreased [1] - Valuations for both developed and emerging markets improved compared to the previous week [1] Earnings Expectations - Earnings expectations for Japanese and European stocks were revised upward last week, with the following changes: 1) Hong Kong's Hang Seng Index 2025 EPS forecast adjusted from -2.1% to -2.0% 2) U.S. S&P 500 Index 2025 EPS forecast revised from +10.5% to +11.8% 3) Eurozone STOXX 50 Index 2025 EPS forecast adjusted from -4.5% to -4.4% [2] Economic Expectations - The U.S. economic surprise index rose last week, potentially due to stronger-than-expected corporate earnings and easing geopolitical tensions [2] - The European economic surprise index also improved, likely supported by better-than-expected GDP growth in the Eurozone for Q4 [2] - The Chinese economic surprise index showed marginal improvement, influenced by expectations surrounding real estate and service consumption policies, as well as improved Sino-British relations [2] Capital Flows - The hawkish nomination of Walsh as the next Federal Reserve Chair has influenced market expectations, with a slight decrease in the anticipated number of rate cuts for 2026 [3] - Global liquidity remained stable, with significant capital inflows into China, the U.S., South Korea, India, and Europe [3] - The largest incremental capital inflow into Hong Kong stocks came from the Hong Kong Stock Connect [3]

Market Pricing Status - The market transaction activity has slightly increased, but the profit effect has decreased. The average daily trading volume for the entire A-share market rose to 3.1 trillion yuan, while the proportion of stocks that increased in value dropped to 23.6% [6][8][15] - The median weekly return for all A-shares decreased to -3.4%, indicating a decline in profitability [6][8][15] A-Share Liquidity Tracking - Financing funds have seen a slight inflow, while ETF funds experienced a significant outflow. The new issuance scale of equity funds decreased to 35.09 billion yuan, and the overall stock position of public funds has declined [6][20][29] - Private equity confidence index increased by 0.5% compared to December, but the positions have marginally decreased [6][20][41] - Foreign capital inflow into A-shares was 4.13 million USD, with the northbound capital transaction proportion dropping to 0.1% [6][20][42][44] - The IPO fundraising was 5.55 billion yuan, and the scale of private placements was 4.55 billion yuan [6][20] - ETF funds saw a massive outflow of 319.37 billion yuan, with the passive trading proportion decreasing to 9.1% [6][20][28] A-Share Industry Allocation - Financing and ETF funds have both seen outflows from the electronics sector. In terms of foreign capital, net inflows were highest in non-ferrous metals (+119.5 million USD) and automobiles (+38.1 million USD), while transportation (-1.3 million USD) and public utilities (-1.1 million USD) saw net outflows [6][20][3.1] - Financing funds showed net inflows in non-ferrous metals (+13.45 billion yuan) and basic chemicals (+2.05 billion yuan), while defense and electronics sectors experienced net outflows of 2.82 billion yuan and 5.95 billion yuan, respectively [6][20][3.3] - The top sectors for net inflows in the ETF market included non-ferrous metals and chemical ETFs, while electronics, non-bank financials, and banks saw significant outflows [6][20][3.2] Hong Kong and Global Fund Flow - Southbound capital inflow has slowed down, while global foreign capital has marginally flowed into the US and Asian markets. The Hang Seng Index rose by 2.4% during this period [6][20][4.1] - The net buying amount of southbound capital decreased to 2.71 billion yuan, which is at the 15% percentile since 2022 [6][20][4.2] - In the global context, foreign capital inflows were highest in the US (+6.27 billion USD), South Korea (+2.83 billion USD), and China (+2.64 billion USD) [6][20][4.3]

Core Transmission Mechanism - Capital flow: Interest rate cuts may drive international capital towards A-shares due to the increased attractiveness of RMB assets, but caution is needed regarding exchange rate volatility [1] - Exchange rate and trade: The depreciation of the USD and appreciation of the RMB may weaken the competitiveness of Chinese export companies, impacting the stock prices of related sectors [1] - Policy space: Interest rate cuts provide greater operational space for China's monetary policy, potentially releasing liquidity through tools like rate cuts and reserve requirement ratio reductions, which would benefit the stock market [1] - Market sentiment: Interest rate cuts typically boost global risk appetite, potentially increasing foreign capital inflow into A-shares, but external uncertainties such as the risk of a U.S. economic recession must be monitored [1] Specific Impact on A-shares - Real estate sector: U.S. interest rate cuts may lead to capital seeking returns, with some potentially flowing into the Chinese real estate market, stimulating a reduction in financing costs for real estate companies, which is a positive for the sector [2] - Non-ferrous metals sector: Interest rate cuts often lead to USD depreciation, which may increase the prices of non-ferrous metals and other commodities priced in USD, potentially enhancing the profitability of related companies [2] - Aviation sector: Airlines have significant USD-denominated debt, and U.S. interest rate cuts could lower their debt costs, alleviating financial burdens [2] Current Market Background - The Federal Reserve's interest rate cuts may reflect concerns about economic slowdown; if the cuts are preventive, A-shares may benefit from an increase in risk appetite; however, if the U.S. economy is already in recession, A-shares may be dragged down by weak global demand [3] - Overall, the impact of U.S. interest rate cuts on A-shares is multifaceted, requiring a comprehensive analysis of factors such as capital, exchange rates, policy, and sentiment [3]

Market Overview - Market trading activity has decreased, with the average daily trading volume dropping to 2.8 trillion CNY, while the proportion of stocks rising has increased to 76.7%[4] - The median weekly return for all A-shares has risen to 2.7%[4] Fund Flows - Financing funds have seen a slight outflow of 68.9 billion CNY, with the proportion of financing transactions decreasing to 9.8%[4] - ETF funds have experienced a significant outflow of 3264.7 billion CNY, primarily due to state-owned enterprises selling ETFs to optimize their capital structure[4] - New issuance of equity mutual funds has increased to 261.2 billion CNY, indicating a rise in public fund activity[4] Foreign Investment - Foreign capital has flowed into A-shares, with a net inflow of 3.9 million USD as of January 21[4] - The proportion of northbound trading has increased to 18.0%, indicating stronger foreign participation in the market[4] Sector Performance - The top sectors for foreign inflows include non-ferrous metals (+27.3 million USD) and computers (+12.8 million USD), while banks (-35.1 million USD) and telecommunications (-20.8 million USD) saw outflows[4] - In terms of financing, electronics (+206.5 billion CNY) and telecommunications (+95.2 billion CNY) were the leading sectors for inflows, while beauty care (-0.2 billion CNY) and construction materials (-0.5 billion CNY) faced outflows[4] Risk Factors - There are potential risks related to data reporting discrepancies and measurement errors from third-party sources[4]

Market Performance - Emerging markets saw a narrowing increase of 0.9%, while developed markets declined by 0.6%, with the MSCI Global index down 0.4%[9] - The Japanese 10Y government bond yield rose by 7.1 basis points, while the French yield saw the largest decline of 2.3 basis points[9] - COMEX silver and gold prices increased by 14.5% and 8% respectively, indicating strong performance in precious metals[9] Investor Sentiment - Trading volume in the A-share and Hong Kong markets decreased, with the Hang Seng Index trading volume down to 143 billion shares and $639 billion[21] - The short-selling ratio in Hong Kong increased to 13.1%, indicating a slight rise in bearish sentiment among investors[21] Earnings Expectations - The earnings forecast for the Hang Seng Index for 2025 was revised down from 2069 to 2065, while the S&P 500's forecast was adjusted up from 273 to 274[69] - The financial sector in Hong Kong saw the largest upward revision in earnings expectations, while the consumer staples sector experienced the most significant downward adjustment[69] Economic Outlook - The U.S. economic surprise index rose, reflecting a potential recovery, while the European index declined amid trade tensions[69] - Market expectations indicate that the Federal Reserve is unlikely to cut interest rates in January, with a projected average of 1.8 rate cuts for 2026[52] Capital Flows - Recent capital inflows into the Hong Kong market totaled HKD 155 billion, with stable foreign capital contributing HKD 184 billion[64] - The overall liquidity in the U.S. is expected to remain stable, with the SOFR-OIS spread widening, indicating a slight increase in liquidity risk[52]