Since December 17, the Shanghai Composite Index has recorded seven consecutive days of gains, and market sentiment has clearly warmed up. Multiple signals indicate that a classic &#34;year-end to spring&#34; rally is brewing and has gradually begun to unfold. Research reports from several brokerages, including Huaxi Securities, China Merchants Securities, and Guosen Securities, unanimously believe that the current A-shares are in a trading window that is most detached from the fundamentals for the year, with the spring rally in 2026 expected to be neutral to strong.
After reaching a mid-year high of 4034.08 points, the Shanghai Composite Index underwent a month of consolidation and once again produced impressive gains at the year-end. As of the close on December 25, the index rose by 0.47%, closing at 3959.62 points. On the market, over 3,700 stocks rose, with commercial aerospace concept stocks experiencing a surge in limit-up trading, robotics concept stocks exploding, and value stocks showing clear signs of rotation among multiple main lines.
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(Shanghai Composite Index Daily Chart)
The total trading volume of A-shares this year has surpassed 407 trillion yuan, setting a new historical record, with 19 stocks exceeding a trading volume of 100 billion yuan. This milestone not only marks a significant increase in market trading activity but also reflects the gradually enhancing attractiveness of China's capital market.
The strong performance at the year-end has led the market to be filled with expectations for the traditional &#34;spring rally.&#34; According to Huaxi Securities' research report, the necessary conditions for initiating the &#34;spring rally,&#34; such as valuation and liquidity, are gradually being met. China Merchants Securities also released a viewpoint stating that multiple signals indicate that a classic &#34;year-end to spring&#34; rally is brewing and has gradually begun to unfold, with the main driving force coming from expectations of fiscal stimulus in early 2026 and continued increases in holdings by major institutional investors.
Despite the warming of optimistic sentiment, the timing and intensity of the rally's initiation remain the focus of market attention. Guosen Securities' review research shows that the spring rally in A-shares has shown clear characteristics of an early start in recent years, with the main rising phase most likely covering the period from the Spring Festival to the Two Sessions, and industries such as non-ferrous metals, computers, and electronics historically having an advantage in odds. The report points out that under conditions of strong fundamentals, improved liquidity, and limited external shocks, this year's spring rally is unlikely to be weak and is expected to exhibit characteristics of global stock market resonance.
<h2>Huaxi Securities: Conditions for Spring Rally Initiation are Gradually Being Met</h2>
Huaxi Securities' research report points out that the initiation of the A-share &#34;spring rally&#34; usually requires three conditions to be met: a reasonable valuation level, a loose liquidity environment, and effective catalysts to boost risk appetite. Huaxi Securities believes that these conditions are gradually being met.
From the perspective of valuation levels, the current price-to-earnings ratio of the CSI 300 is 14 times, which is at the 76th percentile since 2010, below the historical median plus one standard deviation. The PE of the Wind All A Index is 17.15, at the 66.1% percentile of historical valuation levels, indicating that valuations are in a relatively reasonable range.
In terms of the liquidity environment, the Federal Reserve's interest rate cuts and the Bank of Japan's interest rate hikes have both been implemented, alleviating market concerns about a reversal of arbitrage trading. The Central Economic Work Conference has set the tone for &#34;continuing to implement a moderately loose monetary policy,&#34; indicating that there is still room for domestic reserve requirement ratio cuts and interest rate reductions
Policy Catalysis Level, the Central Economic Work Conference has laid a positive tone, with 2026 as the starting year of the &#34;14th Five-Year Plan,&#34; incremental policies in the fields of technological innovation, anti-involution, and expanding domestic demand are expected to continue to be introduced.
<h2>China Merchants Securities: Positive Factors Are Accumulating</h2>
China Merchants Securities pointed out that the market expects that in 2026, as the starting year of the &#34;14th Five-Year Plan,&#34; fiscal spending is likely to gain momentum ahead of schedule, especially central budget investments may accelerate implementation, thereby driving total demand recovery.
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In terms of funding, research reports from China Merchants Securities show that important institutional investors continuously increasing their holdings in the CSI A500 ETF and other broad-based varieties are becoming a key driving force.
Since December, the A500 ETF has seen significant net subscriptions, with a single-day subscription amount reaching a historical high of 7.1 billion yuan, with funds flowing into A-shares through this product exceeding 40 billion yuan.
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In addition, China Merchants Securities believes that the recent strengthening of the offshore RMB exchange rate may reflect that some overseas funds have begun to anticipate positive changes in domestic policies.
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China Merchants Securities stated that stock ETFs have seen large-scale net subscriptions again, with multiple broad-based ETFs experiencing increased trading volume, indicating that incremental funds tend to position themselves at lower prices. The subsequent appreciation of the RMB is expected to drive foreign capital allocation, and the incremental insurance funds entering the market from the &#34;good start&#34; of premium income at the beginning of the year can be anticipated.
Regarding the appreciation of the RMB, Huaxi Securities also believes that this appreciation is often closely related to improvements in domestic economic expectations or expectations of important policy introductions, which may reflect that some overseas funds have begun to anticipate positive changes in domestic policies.
<h2>Analysis of Historical Patterns of Spring Market Excitement</h2>
Guosen Securities assesses that the rising market at the end of the year and the beginning of the year is often driven by policy catalysis, with obvious characteristics of early running in recent years. Since 2017, only the spring excitements of 2019, 2024, and 2025 have started after the New Year, while before 2017, only 2013 and 2015 started ahead of the New Year. The current market is in a trading window that is least sensitive to the annual and fundamental factors.
From a win rate perspective, A-shares have a higher win rate during the Spring Festival to the Two Sessions period, while H-shares have an even higher win rate from New Year's Day to the Spring Festival, which may see a rebound after the Two Sessions. Comparing the actual main rising time periods in previous years, the main rising segment completely covers the period from the Spring Festival to the start of the Two Sessions, with a probability of 94% that the period from New Year's Day to the Spring Festival overlaps with the actual main rising wave, making it more favorable for early positioning.
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The report points out that strong volatility includes the years 2012 and 2019, with a common characteristic of global easing on the denominator side. In contrast, weak volatility, such as in 2016, 2017, and 2022, often faces pressure on the numerator or risk preference dimension. If the numerator is not weak, liquidity improves, and external shocks are minimal, the spring volatility is unlikely to be too weak.
From the perspective of average odds, A-shares have a slight advantage in the one and a half months following the Spring Festival, but this advantage is mainly contributed by a few specific years. Hong Kong stocks are slightly stronger than A-shares in most years from New Year's Day to before the Spring Festival. The uniqueness of Hong Kong stocks being significantly stronger than A-shares in 2025 lies in the large-scale allocation of Hong Kong stocks by mainland residents through the Stock Connect, combined with factors such as the explosion of the AI industry and the return of the AH premium.
In terms of industry patterns, based on average odds, Guosen Securities' review found that the primary industries of non-ferrous metals, computers, social services, media, and electronics are relatively advantageous; in secondary industries, small metals, energy metals, digital media, motors, and gaming perform better. Since 2010, telecommunications and military industries have led in the probability of positive returns and outperforming the Wind All A index during the period from the Spring Festival to the Two Sessions.
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The report specifically notes that industries with lower win rates from the Spring Festival to the start of the Two Sessions will see an overall improvement in win rates between the Two Sessions and &#34;April 30.&#34; However, the guiding effect of spring volatility on the main line for the entire year is relatively weak. Since 2010, the overlap rate of the top five industries in spring volatility with the previous year's main line is 26.25%, and with that year's main line is 27.5%, although there has been some improvement since 2017.
At the same time, Guosen Securities' research found a significant resonance between global stock markets and China's spring volatility. From the perspective of win rates, the French CAC40 and the Korean Composite Index lead globally with a win rate as high as 93.75%; the U.S. stock market, the UK FTSE 100, and the Australian S&amp;P 200 all maintain a win rate of 87.5%.
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Overall, commodities exhibit a seasonal pattern of &#34;higher win rates and positive returns&#34; in the first quarter. Gold has an average increase of about 4% in the first quarter, while silver, copper, and Brent crude oil also perform strongly during the spring volatility period. This resonance effect is mainly driven by the denominator side and is generally positively correlated with the strength of the central bank's easing signals.
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HUAXI Securities believes that the conditions for the A-share cross-year spring rally have been met: reasonable valuations (the price-to-earnings ratio of the CSI 300 is at 14 times, which is at the historical 76th percentile), loose liquidity (moderately loose monetary policy), and clear policy catalysts (expectations for fiscal stimulus at the start of the 14th Five-Year Plan in 2026). GUOSEN SECURITIES' review found that the highest probability of main gains occurs from the Spring Festival to the Two Sessions, with favorable odds in industries such as non-ferrous metals, computers, and electronics

The Shanghai Composite Index has risen for seven consecutive days. Has the A-share New Year spring rally already begun?