The Two Sessions Set the New Direction: Fund Managers Adjust Investment Roadmaps

Data Source: China Government Network, China Galaxy Securities Research Institute

As the National People’s Congress and the Chinese People’s Political Consultative Conference (Two Sessions) convene, the draft outline of the 14th Five-Year Plan and the Government Work Report have become the focus of investor attention. Both not only chart a clear blueprint for economic development and policy direction but also signal numerous investment opportunities.

Several interviewed fund companies believe that emerging industries represented by biomedicine, new infrastructure projects centered on computing and electricity collaboration, and the domestic large market driven by consumer services contain abundant investment opportunities. As policy expectations stabilize and structural transformation accelerates, the A-share market is expected to enter a new cycle driven by technological innovation and domestic demand recovery.

Biomedicine Included as a New Pillar Industry

This year’s Government Work Report emphasizes “accelerating the cultivation and expansion of new drivers of growth,” with particularly detailed plans for emerging and future industries, becoming a key market focus.

Specifically, the 2026 Government Work Report states that it will “encourage central and state-owned enterprises to lead in opening application scenarios, and develop emerging pillar industries such as integrated circuits, aerospace, biomedicine, and low-altitude economy. Establish mechanisms for future industry investment growth and risk sharing, and cultivate future industries like new energy, quantum technology, embodied intelligence, brain-computer interfaces, and 6G.”

Compared to previous years, this year’s report adds biomedicine to the emerging pillar industries and brain-computer interfaces to future industries, with a higher priority given to future energy within the future industry category.

Driven by favorable policies, on March 6, the biomedicine sector surged, with the CSI Hong Kong Innovation Drug Index rebounding 4.24% in a single day. Stocks like Yaojie Ankang and Rongchang Biotech rose 43.53% and 10.92%, respectively. Additionally, the Wind Brain-Computer Interface Theme Index increased by 1.76%, and sectors like future energy—focusing on nuclear fusion, space photovoltaics, and energy storage—also rose, with stocks such as Seagull Co., China Energy Construction, and Taijia Co. hitting the daily limit.

Liu Jun, Deputy General Manager of Huatai-PineBridge and Director of Index Investment, stated that including biomedicine as a new pillar industry in the 2026 government work report reflects top-level design clarity. With multiple new drugs approved and performance entering a release phase, the sector benefits from policy support and accelerated commercialization, creating a dual resonance of policy and market fundamentals. Given the sector’s recent underperformance, low valuations, and capital inflows, a recovery trend is also anticipated.

Guotai Fund also pointed out that the 2026 government work report explicitly lists biomedicine as a new pillar industry, emphasizing high-quality development of innovative drugs, optimizing centralized procurement and pricing, and improving commercial health insurance support for innovative drugs. This alleviates market concerns about profitability and payment issues. Previously, liquidity shocks caused by global geopolitical conflicts led to relatively low A/H valuations, and the decline in holdings of pharmaceutical stocks by active equity funds in Q4 2025 added selling pressure. As sentiment improves, the sector’s sensitivity to positive marginal changes may increase, providing a higher safety margin and investment window for potential bottoming rebounds.

“Recently, rising geopolitical risk premiums, the Fed’s repeated rate cut expectations causing marginal liquidity tightening, and profit-taking from earlier gains have jointly led to a correction in Hong Kong’s innovative drug stocks,” said Liu Jie, Fund Manager of GF Fund’s Index Investment Department. “For Hong Kong’s innovative drugs, the core logic remains anchored in the industry’s performance turning point in 2026, explosive growth of domestically developed new drugs going global, and valuations at a five-year low (13th percentile over the past five years). The current adjustment somewhat rationalizes the industry. From March to April, key clinical data releases and new healthcare negotiations will be critical, along with catalysts from annual ASCO/ESMO conferences, which investors should watch.”

Computing and Electricity Collaboration Becomes a Clear New Infrastructure

Beyond the aforementioned emerging and future industries, the Government Work Report also emphasizes “building a new form of intelligent economy,” mainly focusing on the industrialization of “AI+” applications. It proposes large-scale intelligent computing clusters and computing-electrical collaboration projects as new infrastructure; promotes large-scale applications of smart terminals and intelligent entities to foster “native intelligent new business models”; and highlights the need to improve data element infrastructure and build high-quality data sets.

Tianhong Fund believes that artificial intelligence remains a key focus, with the report deepening and expanding “AI+” initiatives. This indicates a future where AI is at the core of a comprehensive economic system, tightly integrated with data, computing power, and electricity, forming a full-chain intelligent economy.

Notably, “computing-electrical collaboration” is mentioned for the first time in a government work report and explicitly listed as a new infrastructure project, attracting market attention. Subsequently, Chen Changsheng, Deputy Director of the Research Office of the State Council and a drafting team member, emphasized at a briefing that “there’s a saying online that AI’s end goal is energy. We need to leverage the advantages of the State Grid system to further develop large-scale intelligent computing clusters and computing-electrical collaboration infrastructure.”

Recently, power and grid equipment sectors have been active, with the China Green Power Index and China Power Grid Equipment Index rising 13.54% and 40.51% year-to-date, respectively. The China Power Grid Equipment Index hit a new high on March 6.

Cao Xuchen, ETF Manager of Huabao Power, noted that the recent strong performance of power stocks reflects the accelerating AI transformation of China’s IDC data center industry and the ongoing upgrade of the country’s overall power demand structure. Despite market risk appetite fluctuations, undervalued power sector stocks may be just beginning to reprice, though shifting from logical trading to performance-based trading might only occur in the second half of the year. Overall, the sector has potential for volatile upward movement.

“AI computing power surge boosts power loads, but traditional grids struggle to meet high-density energy consumption. Computing-electrical collaboration, through dynamic scheduling of computing clusters and green energy resources, addresses structural energy supply issues. Policies also call for building ultra-large intelligent computing centers with supporting grids, with surging demand for UHV transmission, flexible DC distribution, and energy storage, likely boosting orders for leading equipment manufacturers. Under policy support, the industry could see trillion-yuan-level incremental space,” said another fund manager focusing on grid investments.

Domestic Demand and Consumption Recovery Are Worth Expecting

It is noteworthy that this year’s Government Work Report places “building a strong domestic market” at the top of the ten major tasks, emphasizing adherence to domestic demand-led growth, coordinated efforts to promote consumption and expand investment, and exploring new space for domestic demand growth to better leverage China’s large-scale market advantage.

Tianhong Fund believes that by 2026, consumption policies will remain strong and more optimized. The report first proposes “formulating and implementing income increase plans for urban and rural residents” and explicitly supports “pilot programs for primary and secondary schools’ spring and autumn holidays” and “implementing paid staggered leave systems for workers,” aiming to stimulate domestic demand through improved consumption scenarios. The recovery of domestic consumption in 2026 is worth期待.

Xingshi Investment notes that expanding domestic demand has been the top government task for two consecutive years, with policies increasingly focused on service consumption and effective investment potential release.

Specifically, policies will target both supply and demand: demand-side policies include optimizing the “two new” policies, allocating 250 billion yuan in ultra-long-term special bonds to support old-for-new upgrades of consumer goods, establishing 100 billion yuan in fiscal-financial coordination funds to promote domestic demand, and using tools like loan interest subsidies, financing guarantees, and risk compensation to support demand expansion. Additionally, plans include implementing income increase programs for urban and rural residents and paid staggered leave systems for workers to free up “money” and “leisure” for consumption. On the supply side, efforts will focus on creating broad, high-visibility new consumption scenarios and accelerating the cultivation of new growth points, as well as expanding and upgrading the service industry to further stimulate resident demand through increased quality and capacity.

Xingshi Investment expects that, given the positive momentum in resident consumption already evident in the first two months, combined with supportive policies on both supply and demand sides, China’s consumer market is likely to demonstrate strong endogenous growth.

Moreover, Jiashi Fund stated that the government work report’s emphasis on deepening consumption stimulus actions and nurturing emerging and future industries provides clearer directions for capital market opportunities. Looking ahead, Jiashi Fund suggests investors actively explore undervalued domestic demand sectors and cyclically favorable assets, including high-quality stocks benefiting from old-for-new policies and expanded goods and services consumption.

Equity Markets Likely to Continue Volatile Upward Trend

Overall, fund companies generally believe that positive policy expectations from the Two Sessions will boost market confidence and risk appetite, with a continued bullish trend expected. Domestic demand and technological innovation or replacing real estate are likely to become key drivers of economic growth. This structural economic transformation could create opportunities for companies aligned with these strategic priorities in the stock market.

HSBC Jintrust Fund noted that recent escalations in overseas geopolitical conflicts have impacted global capital markets, but domestically, the main effect is short-term risk appetite. Looking ahead, the continuation of proactive fiscal policies and moderate easing of monetary policy in 2026 will support macroeconomic fundamentals. As post-holiday production and recovery accelerate, combined with the implementation of growth-stabilizing policies after the Two Sessions, a new market rally is anticipated. Balanced allocation across multiple sectors is recommended, with particular focus on midstream manufacturing, cyclical sectors benefiting from supply-demand improvements, and technology sectors driven by industry trends.

Invesco Great Wall Fund stated that this year’s government work report signals positive outlooks, maintaining certain growth targets and policy support at the macro level, with a high emphasis on cultivating and supporting new economic drivers. Support for technological innovation has reached new heights with many new initiatives. Despite external uncertainties, positive policy expectations will help boost market confidence and risk appetite, supporting a trend of oscillating upward in the A-share market. Investment strategies should focus on policy-supported areas: first, new infrastructure related to AI and green development, and AI+ applications; second, opportunistic investments in domestic demand, especially service-related industries.

Zhang Xun, Deputy General Manager and Chief Equity Investment Officer of Pengyang Fund, believes that the core themes from the Two Sessions revolve around new productive forces, domestic demand stimulation, and deepening reform dividends. The current stock market shows internal momentum for sector rotation: some sectors are overvalued, while others remain undervalued, providing conditions for style rebalancing. The market is shifting from a “dumbbell” structure to a “barbell” structure: one end comprises traditional high-quality leading companies with low valuations and high cost-effectiveness; the other end features the broad tech industry chain represented by AI with large growth potential; the middle includes consumer services and some cyclical sectors.

Caitong Fund suggests that, based on policy signals from the Two Sessions, investors can focus on three long-term themes: first, new quality productivity centered on high-tech manufacturing and equipment; second, the digital China theme aiming to increase the share of digital economy core industries from 10.5% to 12.5%; third, the green low-carbon and energy transition theme driven by shifting from “dual control of energy consumption” to “dual control of carbon emissions.” The 14th Five-Year Plan’s 109 major projects in areas like new quality productivity, modern infrastructure, and green low-carbon initiatives align with these themes, including sectors such as computing power and industrial software, clean energy and new power systems, high-end equipment and industrial robots, aerospace and low-altitude economy, equipment renewal and old-for-new, as well as future energy, quantum technology, embodied intelligence, brain-computer interfaces, and 6G.

“From the policy signals of the Two Sessions, three main themes are worth attention: first, technological innovation and advanced manufacturing, including AI, high-end equipment, and semiconductors; second, energy transition-related industries like new energy, grid upgrades, and energy storage; third, consumption upgrades and service consumption, such as healthcare, elderly care, and cultural tourism. These directions align with national industrial upgrade strategies and have strong long-term growth potential,” said Chen Xianshun, Chief Equity Strategist at Bosera Fund.

Ping An Fund forecasts that the profits of leading Chinese listed companies will significantly rebound over the next 2–4 quarters, supported by moderate monetary easing and proactive fiscal policies. The A-share and Hong Kong stock markets are expected to continue benefiting from the dual growth of numerator and denominator, with current markets still on an upward trajectory.

(Article Source: Securities Times)