During the Spring Festival holiday, A-shares were suspended, while Hong Kong stocks commenced their first trading session post-holiday. The Hong Kong market experienced a general adjustment; however, AI application and robotics sectors saw significant gains against the trend. This aligns with my previous market expectations, as AI applications and robots featured prominently in the Spring Festival Gala, greatly boosting investor confidence in these two directions.
The Hang Seng Tech Index recorded a substantial pullback, primarily because its constituent stocks are mainly internet giants whose profits largely depend on consumer spending. With the current low growth rate in total retail sales of consumer goods, weak consumption growth is weighing on the performance of these tech and internet companies. Consequently, over the past six months, the Hang Seng Tech Index has undergone a considerable adjustment. Intense competition in sectors like food delivery has led capital to question the true technological value of these internet behemoths. Significant funds have flowed out of core tech indices and some major internet companies, seeking purer innovative sectors such as AI applications and robotics, reflecting a shift in capital allocation.
The sharp decline on the first trading day in Hong Kong does not imply a lack of opportunities for Hong Kong stocks in the Year of the Horse. Both A-shares and Hong Kong stocks are expected to continue their slow-bull and long-bull trend, presenting numerous investment opportunities. At the end of last year, I released my Ten Predictions for 2026, clearly stating that US stocks face increased risks of high volatility, while A-shares and Hong Kong stocks would maintain characteristics of a slow-bull market, generating some profitable effects. Over the past decade, I have issued ten sets of predictions, with eight being accurately validated; only the forecasts for 2022 and 2023 were not fully realized. My overall assessment for 2026 remains consistent.
From a monetary policy perspective, the Federal Reserve is expected to continue its interest rate cutting cycle, leading to a further decline in the US dollar index and a moderate appreciation of the Renminbi. Last year's prediction of the Renminbi breaking past 7 has materialized, with it currently around 6.9. This year, the Renminbi may continue to appreciate, a process that could attract more foreign capital into Renminbi-denominated assets, which would be favorable for the annual performance of both A-shares and Hong Kong stocks.
In 2026, China's macroeconomic policies are anticipated to be more proactive and effective. Monetary policy will remain appropriately accommodative, with the central bank utilizing interest rate cuts and reserve requirement ratio reductions to maintain a low-interest-rate, high-liquidity environment, supporting economic recovery and fostering moderate price increases. Fiscal policy is expected to be more vigorous and forceful, stabilizing the economic foundation by stimulating investment and boosting consumption. Various economic indicators are likely to show significant improvement. Regarding real estate policies, more supportive measures are expected. The property sector remains in an adjustment phase. After several years of decline, properties in core areas of first-tier cities have begun to attract genuine demand, potentially leading to a bottoming-out rebound in prices and a recovery in transaction volumes, thereby preventing further erosion of household wealth from falling property prices. However, properties in non-core areas, especially those lacking real demand, might continue to experience low prices and reduced transaction volumes. Therefore, real estate investment should adhere to value investing principles, focusing on properties in good locations, of high quality, and with solid demand fundamentals to ensure genuine long-term value.
In 2026, as the capital markets continue their slow-bull, long-bull trend, the market's profitability effect is expected to persist, attracting more off-market capital, including an accelerated shift of household savings into the capital markets. New fund sales have shown a noticeable recovery but are far from reaching overheated levels. Many new funds currently see daily sales of only a few billion yuan, with very few exceeding ten billion yuan daily. A signal of a market peak would be when daily new fund issuance surpasses one hundred billion yuan consistently across multiple funds, not just a single fund—a scenario that is not imminent. Statistics indicate that approximately 50 trillion yuan in deposits will mature in 2026. These deposits previously enjoyed annual interest rates around 3%, which have now dropped to just over 1%. This may prompt many depositors to consider allocating a portion of their maturing deposits to higher-yielding assets, including fixed-income products like bonds, as well as hybrid funds, equity funds, and other risk assets. The migration of household savings to the capital markets is a major trend, although the pace may vary; the higher the market rises, the faster this shift tends to be. Given the current slow-bull, long-bull market characterization, the transfer of household savings is expected to proceed at a relatively measured pace.
Regarding gold and silver, as mentioned in my Ten Predictions, I have consistently maintained a positive long-term outlook over the past few years. The US government's mounting debt and rising debt servicing costs are significant factors leading some capital away from the US dollar. Future demand for gold is likely to increase, sustaining a long-term upward trend for international gold prices. Due to substantial volatility and gains last year, some fluctuations are expected to continue. Therefore, while the long-term trend is upward, significant volatility should be anticipated. Silver trends similarly to gold, also exhibiting increased volatility but maintaining an upward trajectory. Precious metals should be viewed from an allocation perspective, with less focus on short-term fluctuations. After previous significant adjustments, precious metals may offer allocation value. In recent years, I have recommended allocating approximately 20% of an investment portfolio to gold-related assets as a sound strategy.
In my Ten Predictions for 2026, I have outlined clear views on capital markets, real estate, exchange rates, and precious metals. Subsequently, sector rotation in the stock market is expected to accelerate. While 2025 was dominated by tech stocks, 2026 will still see technology as a key investment theme. The recent Spring Festival Gala featured appearances by four robotics companies, generating sustained interest in the humanoid robotics sector, which is anticipated to remain a significant investment主线 in 2026. Additionally, the Gala highlighted numerous AI elements, making AI applications another noteworthy direction for the year. More sectors are likely to experience rotational performance in 2026, including new energy, non-ferrous metals, defense, and even some consumer blue-chips, potentially creating opportunities for sequential outperformance. This could further enhance the profitability effect in 2026, although achieving returns may remain challenging. Many tech stocks saw substantial gains in 2025 and are likely to experience significant divergence in 2026. Tech companies with genuine core technology and R&D capabilities may continue to perform well, while those driven purely by speculation could face corrections. Investors must remain vigilant about risks.
Global geopolitical tensions in 2026 may introduce external disturbances to the markets. However, adhering to value investing principles—responding to changes with consistency—by allocating to high-quality stocks and funds is the best strategy to capitalize on this market trend. Avoiding chasing rallies, panic selling, and frequent trading is crucial for successfully navigating this slow-bull, long-bull market.