CSC: It is expected that the A-share year-end market will continue, with AI+ as the mid-term main line

According to the Zhitong Finance APP, CSC has released a research report stating that bond market interest rates are rapidly declining, and the dual bull market pattern of China's capital market in both stocks and bonds continues. Recent data shows improvement in real estate sales, and overall, there is still room for policy enhancement. The bank believes that loose policies are expected to be further strengthened early next year, with expectations for reserve requirement ratio cuts and interest rate reductions. Funds are likely to flow further into the A-share market, and specific policies from various ministries are also expected to be gradually implemented. It is anticipated that the year-end market trend will continue. Attention should be paid to potential policy beneficiaries, with AI+ being the mid-term industry main line worth continuous tracking. Focus industries include non-bank financials, real estate chain, media, retail, tourism, consumer electronics, construction, etc. Key themes to watch include AI+ and the primary economy.

CSC's main viewpoints are as follows:

The Federal Reserve's interest rate cut has been implemented, and inflation's decline remains to be observed. The Federal Reserve announced a 25 basis point rate cut at the December FOMC meeting while maintaining a hawkish stance. The dot plot indicates that future rate cut pace will be more cautious, and there is uncertainty regarding the speed of core PCE inflation's decline. There is some uncertainty regarding U.S. inflation and economic data in 2025, which is one of the external disturbance factors for A-shares.

Improvement in real estate sales, with room for policy enhancement. On the domestic policy front, the Ministry of Commerce is accelerating the issuance of documents to promote the development of the primary economy, driving consumption upgrades and new consumption models; the central bank has maintained the LPR rate unchanged, but the market has high expectations for interest rate cuts early next year, leading to a rapid decline in bond market interest rates. Recently, the real estate industry has shown signs of improvement, with indicators such as land transaction area rebounding in mid-December, and there is still room for policy enhancement. Attention should be paid to the subsequent policy implementation efforts.

In the context of a low-interest-rate asset shortage, insurance funds may accelerate the allocation of equity assets. The continued decline in medium- and long-term interest rates may exacerbate the asset-liability mismatch for insurance institutions. With the ongoing promotion of the industry’s "New Year’s Red" in 2025 and steady growth in renewal premiums, along with the continued decline in medium- and long-term interest rates, insurance funds may accelerate the allocation of equity assets by year-end.

The market is active, with a focus on policy direction and the AI+ industry main line. This week, market trading volume has declined, and the balance of margin financing has slightly decreased, cooling short-term speculative sentiment. However, artificial intelligence remains the market's main line, with the policy-driven effect of "Artificial Intelligence+" becoming prominent, and AI hardware-related sectors performing strongly. New consumption formats are also attracting attention, with the WeChat small store's "gift-giving" feature entering gray testing, injecting new vitality into holiday consumption. Overall, thematic investment rotation is significant, and it is recommended to focus on sub-sectors supported by policies, such as AI hardware and consumption upgrades.

Risk Analysis

The effectiveness of domestic demand support policies is lower than expected; stock market selling pressure exceeds expectations; geopolitical risks; U.S. stock market volatility exceeds expectations