Looking ahead to 2026, the inaugural year of the 15th Five-Year Plan period, the market is actively searching for new directions. Confronted with shifts in the macroeconomic landscape and adjustments in industrial structures, investors need to see through short-term fluctuations to discern the medium- to long-term trends. This is no easy task, but it is a worthwhile endeavor. To this end, CITIC-Prudential Fund is launching the "2026 Outlook" series, sharing our research and insights across eight key areas: macroeconomics, fixed income, fixed income+, equities, commodities, dividends, cyclical sectors, and technology. Our aim is not to predict market movements, but to clarify underlying logic; not to provide definitive answers, but to offer diverse perspectives. We hope this content will serve as a valuable reference to support your investment decision-making process. This series comprises eight articles, which will be released sequentially. Thank you for your interest. Reflecting on 2025, the A-share market achieved numerous historic milestones amidst a dramatic rally. Looking forward to 2026, CITIC-Prudential Fund believes that while short-term sentiment and liquidity conditions may cause fluctuations, the medium- to long-term "slow bull" market structure remains promising, driven by earnings recovery, ample liquidity, and favorable industry trends. The primary investment focus is likely to shift further from conceptual expectations toward the verification of fundamental performance. The year 2025 is destined to be remembered as a significant chapter in the history of China's capital markets. Around the Spring Festival period, the user base of the domestic large language model DeepSeek rapidly surpassed 100 million, outpacing the early growth records of ChatGPT. This development ignited a rally in technology sectors like computing power and cloud computing, serving as the year's first major market catalyst. In April, amidst severe volatility in global markets, expectations for a "Chinese-style stabilization fund" and clear liquidity support from the central bank effectively established a "policy floor," significantly boosting market confidence. By mid-year, new consumer forces, exemplified by the popularity of Labubu潮流玩具, the global box-office success of "Ne Zha 2," and the commercial triumph of the Scottish Professional Football League, rapidly emerged. This not only drove share prices of related companies to double but also injected fresh growth momentum into the consumer sector, aligning with the policy directive to "comprehensively expand domestic demand." Market scale and activity also reached new heights. The total market capitalization of A-shares surpassed the 100 trillion yuan mark in June, while trading volume hit a historical second-highest in August, with financing规模 exceeding 2015 levels. These milestones signify a profound recovery in market participation and confidence. Regarding market style for 2026, CITIC-Prudential Fund anticipates a shift towards greater balance and refinement, rather than dominance by a single style. On one hand, as anti-involution policies progress, deflationary pressures on industrial goods prices are expected to ease, gradually transmitting to downstream sectors. This could create opportunities for valuation repair and profit improvement in pro-cyclical areas like traditional cycles and consumer discretionary. On the other hand, growth styles with solid earnings foundations are likely to persist throughout the year, but may move away from broad-based gains. Companies within sectors like AI application, import substitution, and global expansion that possess genuine technological barriers and commercialization capabilities may continue to attract market favor due to their high growth potential. We believe the 2026 style dynamic may not be about one style leading another, but rather about carefully selecting high-quality companies with fundamental support across all styles. Regarding investment themes, we believe the AI application end could become a crucial主线 in 2026. The underlying logic is threefold: First, the center of industrial value is shifting from computing power infrastructure to the application layer, suggesting the investment rationale may transition from "selling shovels" (hardware and infrastructure) to "mining for gold" (practical applications and commercialization). Second, AI's赋能 in content, social interaction, entertainment, and countless industries has entered the phase of commercial implementation; applications that are close to end-users or can empower B2B enterprises are more likely to develop clear business models and profit growth points. Third, the scope of AI's赋能 is extremely wide, continuously generating cross-industry investment opportunities. From a financial perspective, 2026 may be characterized by an "earnings baton pass." Key areas to monitor include: first, the progression of the "computing power - storage - power semiconductors - foundry" chain and the pace of "application-end commercialization"; second, potential inflection points in sectors like energy storage & lithium battery chains, CXO/medical devices, and non-bank financials; third, signals of balance sheet cleanup and cycle shifts in sectors like baijiu. When positioning, close attention will be paid to the recovery progress of orders and profits, alongside factors like anti-involution and supply-side reforms, expansion of AI infrastructure capital expenditure, acceleration of pharmaceutical innovation and出海, and optimization of capital market systems. The key determinant for investment success in 2026 is likely to focus on the ability to deliver on fundamentals. Market scrutiny of companies will shift from speculative hype towards rigorous verification of profit growth quality, business model sustainability, and global competitiveness. Particularly in hot sectors like AI, pharmaceuticals, and advanced manufacturing, companies with core technologies, clear commercialization paths, and strong execution capabilities are expected to stand out. On the positive side of the macro environment: Anti-involution policies continue to improve corporate profit conditions, while economic drivers are shifting towards new forces like new energy and semiconductors; the long-term trend of household asset allocation moving towards equity markets may just be beginning, implying substantial potential incremental capital; if the Federal Reserve enters a rate-cutting cycle, it could create a favorable environment for global risk assets; industry cycles for AI, semiconductors, and smart vehicles still exhibit upward momentum, potentially providing clear investment themes. Potential downsides and risks are likely to stem mainly from: external uncertainties such as Sino-US competition, global trade policies, and geopolitical conflicts; as well as market volatility triggered by slower-than-expected fundamental improvements in certain sectors or companies, or localized valuation bubbles. Despite traditional consumption and property sectors experiencing relative underperformance in 2025, within the new consumption sphere—particularly AI-integrated intelligent companionship and interactive entertainment—2026 could see breakthroughs from zero to one. AI companionship platforms, virtual social assistants, and related smart hardware (like more advanced AI headphones, AI glasses, etc.) are creating entirely new consumer markets based on emotion and experience, with subscription services and content付费 models holding vast commercial potential. We believe significant opportunities may emerge in: AI computing power infrastructure facing tight supply-demand conditions; consumer electronics chains driven by new device-side AI products; the humanoid robot industry chain entering a mass-production breakthrough phase; and the healthcare sector achieving high growth through innovative global expansion. In the出海 direction, high景气 is expected to continue for international engineering contracting and construction SOEs going global, the AI computing chain (optical modules/liquid cooling), offshore wind power and submarine cable chains, leading home appliance and light industrial companies with localized production and channel出海, as well as cross-border e-commerce and game content出海. Taking culture and content出海 as an example, the gaming industry is entering a new phase of "global localization and deep cultivation," characterized by稳固 leading players and evolving梯队 structures, with content出海 (trendy toy IPs, breakout anime/game titles) flourishing across multiple fronts, suggesting continued growth potential in 2026. Looking ahead to 2026, CITIC-Prudential Fund believes the market will evolve towards a healthier and more sustainable trajectory driven by fundamentals. Greater emphasis will likely be placed on stock selection, identifying those high-quality companies capable of genuinely delivering growth value across multiple themes such as technological self-reliance, industrial upgrading, and earnings recovery. Note: Mention of any specific stocks/sectors/industries does not constitute any form of recommendation or endorsement, nor does it represent information on fund holdings or trading direction. The above content is solely intended to illustrate investment perspectives and current market analysis, and should not be construed as an investment commitment. Fund investment strategies, sector allocations, specific investment targets, and their weightings are subject to adjustment based on market conditions within the parameters allowed by the fund合同. Risk Disclosure: This material is for informational purposes only. The views expressed represent current opinions and are not predictive of future events, nor do they constitute investment advice or a definitive basis for future investment decisions. This material is not intended to provide financial information services or serve as an offer or solicitation to buy or sell any securities or financial products, nor is it an investment opinion or recommendation regarding any company, security, or financial product. This material may contain "forward-looking" information not based solely on historical data; such information may involve estimates and forecasts, but there is no guarantee that any predictions will materialize. Readers must exercise their own judgment regarding reliance on the information provided herein. The above content is not an investment commitment. Fund investment strategies, sector allocations, specific investment targets, and their weightings are subject to adjustment based on market conditions within the parameters allowed by the fund合同. The fund manager reminds investors of the "buyer beware" principle of fund investment; after making an investment decision, investors bear the investment risks and consequences arising from fund operation conditions and net asset value changes. Past fund performance is not indicative of future results, and the performance of other funds does not guarantee the performance of this fund. The fund manager is committed to managing and utilizing fund assets with honesty,信用, and diligence, but the fund does not guarantee profitability, nor does it guarantee minimum returns or the safety of principal. Please read the prospectus, key fund information document, and fund合同 carefully before investing. Funds carry risks; invest with caution.