As the Year of the Snake dawns, the Chinese stock market, specifically the A-share market, has opened with a significant bang during its first two trading daysThe atmosphere is buzzing with activity, and fresh capital has shifted its focusOn February 6th, we witnessed an impressive surge in trading volume, with transactions exceeding 1.5 trillion yuan, the highest since December 17, 2024. This was an increase of over 254.5 billion from the previous trading day, with more than 4,800 stocks rising across the boardIndustries like electronics, computers, mechanical equipment, and power equipment each saw transaction amounts surpassing 100 billion yuan, collectively accounting for half of the market’s total trading volume.

This surge was not merely an anomaly but rather a reassuring sign that substantive investments were entering the market

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Notably, after experiencing a net outflow, the main capital flow turned around on February 6, with a net inflow of 18.78 billion yuan in the Shanghai and Shenzhen marketsHowever, there was a pattern emerging that hinted at a possible "one-day wonder," as large sums were allocated one day only to see substantial withdrawals the following day, creating an air of unpredictability.

On the very first trading day of the Snake Year, investors engaging in margin trading, or "financers," adopted a "buying spree" mentalityThis phenomenon saw a net purchase of 19.845 billion yuan which ended the streak of net outflows leading up to the trading session, marking the highest level of investment since November 12, 2024. This sudden influx reflects heightened expectations and optimism among market participants.

Looking ahead, the market's trajectory remains a topic of speculation

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Industry insiders suggest that the emerging theme of AI will be a critical focal pointThe breakthrough advancements in DeepSeek continue to bolster confidence in China's AI sector and its associated industriesHowever, for sustained growth, it is essential to monitor improvements in fundamental economic trends.

The signs of a possible "one-day wonder" in principal funds

The A-share market's major indexes collectively rose on February 6th, with the Shanghai Composite Index climbing 1.27% to reach a trading volume of 590.42 billion yuan

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Meanwhile, the Shenzhen Component Index gained 2.26% with a trading value of 944.939 billion yuan, and the ChiNext Index saw an increase of 2.80%, amounting to 464.949 billion yuanThe newly established innovative indexes also reported substantial gains, with significant upticks of 3.33% and 5.51% for the Science and Technology Innovation Comprehensive Index and the Northern Exchange 50 respectively.

In terms of transaction volume, the total shattered previous records, marking the highest activity level in over a month with 1.535 trillion yuan processedThe previous day, February 5th, also reflected a rising trend, where trading amounted to an increase of 172.692 billion yuan compared to the day before, indicating a positive rebound in market activity during these initial trading days of the Snake Year.

During these two trading days, the electronics and computer sectors recorded impressive transaction values, each surpassing 200 billion yuan, while the machinery sector saw its trading figures exceed 100 billion yuan

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The power equipment industry, in particular, recorded a notable rise from 79.9 billion yuan on February 5th to over 102.6 billion yuan on February 6th, reflecting broad interest in these key sectors.

But where is this principal capital being directed? According to data from Wind, although there was an overall outflow on February 5th, the pattern dramatically shifted on February 6thKey funds flowed back into the market, leading to a net injection of 18.78 billion yuan, showcasing the dynamic shifts in investor sentiment.

Analyzing sector movements provides more insightsOn February 5th, the computer industry was favored, with an inflow of 6.745 billion yuan; however, on February 6th, it saw a significant net selling of 1.012 billion yuan, which means the industry shifted drastically in investor focus

Conversely, the electronics sector, which previously faced outflows of 2.681 billion yuan, became a darling on February 6th, receiving an inflow of 8.204 billion yuan, reflecting the fluctuations of interest amidst rapid changes in market sentiment.

Similarly, industries like automotive, non-bank financial, and power equipment experienced a change in fortunes, witnessing shifts in net inflows that suggest a broader market theme favoring adaptability and quick responsiveness to investor interest.

Specific stocks gyrate along with this pulseShares from companies such as Lio Group, Giant Wheel Intelligent, and 360 Security experienced net inflows on February 5th but saw significant outflows the next day, reflecting the challenging landscape for investors trying to catch the ebb and flow of capital.

However, some stocks managed to secure favor across both trading days

BYD emerged as a standout single stock, garnering a net inflow of 2.2 billion yuan on February 6th, following a separate inflow of over 300 million on the previous dayCompanies like Tuowei Information Technology and Softcom Dynamic also appear to harbor strong investor confidence, maintaining top net inflow figures.

In terms of leverage, the data also shows that margin investors took a decisive stance on February 5th with a net purchase of 19.845 billion yuan, signifying a break from several days of capital withdrawal preceding the Chinese New Year, further accentuating confidence in future performance.

Computer technology stands out as a prime focus for financers, with net purchases of 3.28 billion yuan, followed by electronics surpassing 2 billion yuan

Additionally, sectors such as power equipment, machinery, and banking also witnessed net purchases in excess of 1 billion yuan each, signifying broader confidence in these critical industries.

Stock-wise, on February 5th, a total of 2,490 stocks saw net purchases through margin trading, with 592 of those surpassing 10 million yuan in net investmentsThe standout was Zhongji Xuchuang, with a net inflow of 405 million yuan, trailed closely by Kingsoft Office and China Ping An exceeding 300 million yuan eachThe list of top financiers also featured contemporary leaders like CATL, Runhe Software, and Inspur.

Future market positioning and strategy

The ongoing excitement surrounding DeepSeek is significantly shaping market trends in the early days of the Snake Year

The notable spikes in the DeepSeek Index and growth in sectors like robotics and consumer electronics underline a strong thematic investment narrativeHowever, this raises the question of where A-shares will move next, and what the investment opportunities might be.

More specifically, analysts emphasize that the "spring trading funds" are likely to remain active as the momentum of various themes carries through the seasonAccording to Fu Jingtao, the chief analyst for A-share strategies at Shenwan Hongyuan, new thematic leads are enhancing opportunities involving the domestic AI industrial chain and applications.

Additionally, as we approach the first-quarter report periods of 2025, the balance of supply and demand is expected to show improvement, highlighting potential focal points including power batteries for new-energy vehicles, innovative medicines, and CXO firms.

Building on this, Chen Guo, chief strategist at CITIC Securities, suggests that a focus on themes of quick growth, such as AI applications, robotics, and emerging consumer trends is advisable, reflecting the optimistic sentiment sprouting from recent shifts in policy and market performance.

Chen bases his recommendation on the macroeconomic climate, noting that February lies in a policy vacuum regarding macroeconomic data

Forecasts suggest a continuation of stability-focused domestic policies, with fiscal and monetary support expected to play key rolesThe upcoming meetings in March could reveal policy directions that will drive market sentiment moving forward.

Huang Chendong from Guojin Securities echoes these sentiments, indicating that easing overseas pressure could clear a path for improvements in domestic macro conditionsWith significant attention on fiscal policy developments expected in the upcoming government meetings, anticipatory moves in the market may occur as investors look to position themselves accordingly.

Post adjustments, many stocks have returned to reasonable valuation levels, with a select few companies offering attractive investment opportunities

Continued implementation of macroeconomic control measures and stimulus policies will likely pave the way for an upward trend in stock indices, although close attention to policy changes, liquidity, and external factors remains essential.

Yet, Fu Jingtao expresses caution in anticipating a significant turn in the broader economic landscape for now, citing three main reasons: while overseas pressures are manageable in the short term, potential escalation in tariffs from the U.Sremains a risk; the domestic economy is seeing visible structural improvements that are yet to be fully projected; and the thematic momentum is supported by liquidity and evolving industry trends, with national innovation garnering increasing consensus.

Overall, the protagonists of this new chapter in stock market activity reflect a pending bull market as anticipations of positive turns in fundamentals linger on the horizon.