Seven consecutive gains for the Shanghai Composite Index; has the cross-year spring rally in A-shares already begun?

Since December 17, the Shanghai Composite Index has recorded seven consecutive positive sessions, with market sentiment clearly heating up. Multiple signals indicate that a classic "year-end to spring" rally is being brewed and has begun to unfold. Research reports from brokerages such as Huaxi Securities, China Merchants Securities, and Guosen Securities all agree that A-shares are currently at the least sensitive trading window of the year in relation to fundamentals, with the spring 2026 upturn expected to be neutral to strong.

After hitting the mid-year high of 4034.08 points, the Shanghai Composite underwent a month of consolidation before rising again with strong positive sessions at year-end. As of the close on December 25, the Shanghai Composite was up 0.47% at 3959.62 points. On the trading board, more than 3,700 stocks rose market-wide, with commercial aerospace concept stocks hitting the daily limit, robot concept stocks surging, value stocks setting the stage, and multiple themes rotating prominently.

(Shanghai Composite Daily Chart)

Total A-share turnover this year has surpassed 407 trillion RMB, setting a new record, with 19 stocks seeing turnover exceed one trillion RMB each. This milestone not only marks a significant improvement in market trading activity, but also shows the increasing attractiveness of China’s capital market.

This strong year-end performance has fueled market anticipation for the traditional "spring agitation." According to Huaxi Securities’ research, the necessary conditions for launching the "spring agitation" rally in terms of valuation, liquidity, etc., are gradually being met. China Merchants Securities also released a viewpoint, stating that multiple signals show a classic "year-end to spring" rally is brewing and gradually rolling out, driven mainly by expectations of stronger fiscal action at the start of 2026 and continued accumulation by major institutional investors.

Although optimism is rising, the timing and strength of the rally remain the market’s focus. Guosen Securities’ review shows that A-share spring agitation rallies have shown a clear tendency to front-run in recent years, with the main surge most likely covering the period from the Spring Festival to the Two Sessions. Industries such as nonferrous metals, computers, electronics have historically had superior odds. The report states that, given a not-weak numerator, improving liquidity, and limited external shocks, this year’s spring agitation is unlikely to be too weak, with a global stock market resonance feature.

Huaxi Securities: Conditions for Spring Agitation Emerging

Huaxi Securities’ research notes that the start of the A-share “spring agitation” rally typically requires three conditions: reasonable valuation levels, a loose liquidity environment, and catalysts that effectively boost risk appetite. Huaxi Securities believes these conditions are gradually being met.

In terms of valuation, the current CSI 300’s PE ratio is at 14, at the 76th percentile since 2010, below the historical median plus one standard deviation. The Wind All A Index PE stands at 17.15, at the 66.1st percentile, a relatively reasonable range.

Liquidity-wise, overseas, the Fed’s rate cut and BOJ’s rate hike have both been implemented, easing concerns about the reversal of arbitrage trades. The Central Economic Work Conference set the tone to "continue to implement moderately loose monetary policy," indicating room for domestic RRR and interest rate cuts.

Policy catalysts, the Central Economic Work Conference has set a proactive tone; with 2026 as the start of the 15th Five-Year Plan, incremental policies in science and innovation, anti-involution, and expanding domestic demand are likely to keep coming out.

China Merchants Securities: Positive Factors Accumulating

China Merchants Securities notes that with 2026 the start of the 15th Five-Year Plan, fiscal spending is expected to move early, especially with Central Budgetary Investment likely to roll out faster, reviving aggregate demand.

On the funds side, China Merchants Securities’ report shows that key institutional investors are continuously increasing holdings in broad-based products such as CSI A500 ETF, becoming a crucial driver.

Since December, the A500ETF has seen clear net subscriptions, with single-day subscriptions reaching a record 7.1 billion RMB, driving more than 40 billion RMB into A-shares through this product.

Furthermore, China Merchants Securities believes the recent strengthening in offshore RMB exchange rates may reflect that some overseas funds are starting to expect positive changes in domestic policies.

China Merchants Securities states that equity ETFs are once again seeing large-scale net subscriptions, with several broad-based ETFs seeing increased trading volumes, pointing to incremental funds tending to buy on dips. Subsequent increases in foreign allocations brought by RMB appreciation and incremental insurance funds entering the market due to the “opening red” in annual premium income are promising.

Regarding RMB appreciation, Huaxi Securities also believes this often closely correlates with improved domestic economic expectations or anticipated major policy releases, possibly signaling that some overseas funds are expecting positive policy changes at home.

Analysis of Historical Spring Agitation Patterns

Guosen Securities judges that year-end and new-year rallies are mostly driven by policy catalysts, and have shown a clear front-running pattern in recent years. After 2017, only in 2019, 2024, and 2025 did spring agitation start after the new year; prior to 2017, only in 2013 and 2015 did it start ahead of the new year. The current market is in the least fundamentals-sensitive trading window of the year.

In terms of win rates, A-shares have a higher win rate from the Spring Festival to the Two Sessions, while H-shares are stronger from New Year’s Day to the Spring Festival, with a possible catch-up rally after the Two Sessions. Comparing actual main rally periods over the years, the period fully covering Spring Festival to the start of the Two Sessions has the highest probability, with a 94% overlap between New Year’s to Spring Festival and the main rally, favoring early positioning.

The report points out that strong “agitation” years include 2012 and 2019, commonly featuring loose monetary conditions globally ("denominator” side). Weaker agitation years—2016, 2017, and 2022—tend to face pressure on “numerator” or risk appetite. In cases where the numerator isn’t weak, liquidity is improving, and external shocks are limited, spring agitation is unlikely to be weak.

In terms of average odds, A-shares hold a slight advantage in the month and a half after Spring Festival, but this edge is concentrated in a minority of years. Hong Kong stocks are generally stronger than A-shares before the Spring Festival in most years. The exceptional strength of Hong Kong stocks in 2025 is due to massive allocations via Stock Connect from mainland residents, the AI industry boom, and AH premium normalizing, among other factors.

Industry-wise, Guosen Securities’ review found, primary sectors like nonferrous metals, computers, social services, media, and electronics performed relatively better; among secondary sectors, minor metals, energy metals, digital media, electric motors, and games did best. Since 2010, communication and military sectors saw the highest probability of positive returns and outperformance from Spring Festival to Two Sessions.

The report especially notes that industries with low win rates from Spring Festival to the start of the Two Sessions show better win rates after the Two Sessions until April 30. However, spring agitation has weak indication for full-year main trends; since 2010, the top five spring agitation sectors only overlapped with last year’s main theme 26.25% and that year’s theme 27.5%, although the rate has improved since 2017.

Meanwhile, Guosen Securities’ research found that global stock markets significantly resonate with China’s spring agitation. In terms of win rates, France’s CAC40 and South Korea’s KOSPI lead globally, at 93.75%; US, UK FTSE 100, and Australia S&P 200 all consistently stand at 87.5%.

Commodities generally show a seasonal trend of "high win rates, positive earnings" in the first quarter. Gold’s average Q1 increase is about 4%, and silver, copper, and Brent oil also performed strongly during spring agitation. This resonance is mostly driven by looser monetary conditions globally (“denominator” side), and strongly correlated with central bank easing signals.

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