China Galaxy Strategy: From the "14th Five-Year Plan" to 2026, Main Trends May Emerge Amid A-Share Market Fluctuations

This Week’s A-Share Market:

(1) From March 2 to March 6, 2026, the A-share market experienced volatility and adjustment, with the All A Index down 2.30%. The Beijing Stock Exchange 50 declined over 7%, while the STAR 50, CSI 1000, ChiNext Index, and Shenzhen Component Index also fell more than 2%. Escalating Middle East geopolitical conflicts led global investors to seek safety. Coupled with rising oil prices boosting U.S. inflation expectations, the U.S. dollar index briefly rose and fluctuated. Market sentiment was quickly released in the first half of the week, then showed a recovery on Thursday and Friday.

(2) In terms of style, the large-cap style outperformed this week. The SSE 300 (-1.07%) performed better than the CSI 1000 (-3.64%). Most of the five major style indices declined, with growth style falling 3.58%, while stability style rose 1.91%.

(3) Sector-wise, most primary industries declined this week. The top three gainers were Petroleum & Petrochemicals, Coal, and Utilities. Media, Nonferrous Metals, and Computers saw the largest declines.

This Week’s Fund Flows:

(1) Trading activity in the A-share market increased compared to last week. The average daily turnover was 26,446 billion yuan, up 2,043.26 billion yuan from the previous week; the average daily turnover rate was 2.24%, up 0.25 percentage points.

(2) As of Thursday, the margin financing and securities lending balance was 2,651.801 billion yuan, down 17.379 billion yuan from last week.

(3) Among newly established funds this week, there were 8 equity funds with a total issuance of 5.234 billion units, up 3.783 billion units from last week; these accounted for 38.87% of the total units issued.

(4) From February 26 to March 4, global fund net inflows into A-shares increased, with weekly net inflow reaching $1.471 billion (previous: $675 million). Overseas funds net inflowed $1.144 billion into A-shares (previous: $559 million).

Valuation Changes This Week:

The PE (TTM) of the All A Index decreased by 1.18% to 23.43x, placing it in the 94.75th percentile since 2010. The PB (LF) decreased by 1.1% to 1.93x, in the 57.36th percentile since 2010. The yield spread of A-shares bonds was 2.4862%, near 1.62 standard deviations below the 3-year rolling average of 3.3193%, at the 43.06th percentile since 2010.

Market Outlook for A-Share Investment:

The sharp volatility at the start of the week was not a trend reversal but a short-term emotional release under external pressures. The medium- and long-term upward trend remains intact. The market will gradually shift from “emotion-driven” to “fundamentally driven,” characterized by “volatility digestion, momentum enhancement, and structural focus.”

On one hand, the 2026 government work report emphasizes domestic demand, cultivating new growth drivers, and high-level technological independence, which supports structural opportunities. The upcoming release of the “14th Five-Year Plan” will provide clear long-term investment directions, encouraging capital to flow into high-quality sectors aligned with national strategies.

On the other hand, the upcoming disclosure of 2025 annual reports and 2026 Q1 reports will be key anchors for the next phase. Companies exceeding earnings expectations are likely to attract capital.

Allocation Opportunities:

• Main Line 1: Short-term certainty, price increases, and risk aversion. If geopolitical conflicts persist, related sectors such as oil & gas, petrochemicals, coal, nonferrous metals, shipping, and ports may see pulse opportunities.

• Main Line 2: Medium- to long-term certainty, driven by improved supply-demand dynamics and industry profit recovery, including “anti-involution” concepts and undervalued dividend assets. Focus on nonferrous metals, basic chemicals, steel, construction materials, and financials.

• Main Line 3: Medium- to long-term certainty, focusing on key areas like power grids, electricity, storage, computing power, consumer electronics, communication equipment, semiconductor, and military industries. Consumer sectors such as light industry, textiles, home appliances, and agriculture are also recommended.

Risk Warnings:

• External uncertainties; policy risks falling short of expectations; market sentiment instability; ongoing liquidity adjustments.

(Source: Galaxy Securities)