China’s equity market looks set for a familiar end‑of‑January pattern: a short, sentiment‑driven cooling ahead of the Lunar New Year followed by a pickup in trading and a likely resumption of gains after the holiday. Ten leading domestic brokerages surveyed by Chinese media mostly flagged seasonal liquidity tightening and rising risk aversion as headwinds in the days before the festival, while stressing that the underlying drivers behind the year‑end rally remain intact.
Analysts pointed to a cluster of technical and calendar effects. Large withdrawals from broad‑based ETFs, profit‑taking ahead of the long holiday, and a historically observed dip in investor activity as liquidity tightens all contribute to downside pressure on indexes in the immediate term. Compounding this, the nomination of Kevin Warsh as the next Federal Reserve chair lifted the dollar and U.S. Treasury yields, creating additional cross‑border headwinds for emerging‑market flows into A‑shares.
Yet brokers were careful to distinguish tactical weakness from structural change. Several houses argued that the concentrated, cross‑sector rally that powered the market into the new year has not been overturned: fresh policy catalysts around the upcoming Two Sessions and still‑supportive domestic liquidity conditions should restore market heat after the holiday. Most firms expect a limited overall correction for the broad All‑A index, with the window of weakness providing a new entry opportunity ahead of an anticipated post‑festival rebound.
Sector consensus shows a rotation away from the high‑volatility, small‑cap “speculative” leaders toward larger, quality and cyclical exposures. Recommendations ranged from power equipment, chemicals, and green energy equipment to storage and semiconductor equipment, while caution was urged on short‑term plays such as precious metals. Brokers also noted that ETF redemption pressure has likely ebbed and that heavyweight names may enjoy a repair window, fostering a shift from small‑cap to large‑cap leadership in the near term.
February may be defined more by speed of rotation than by a directional breakout. Several firms emphasised that as price signals from commodity and industrial chains continue to surface, sector leaders will switch faster, with cyclicals benefiting from broad price recovery narratives while AI and semiconductor supply‑chain names remain structurally attractive. Historical seasonality also offers a silver lining: February is among the months with the highest historical win rates for major Chinese indices, which underpins many brokers’ recommendation to maintain medium‑term exposures.
Risk management, not market timing, is the common refrain. Advisers counsel reduced portfolio elasticity and a tilt toward high‑probability, lower‑beta plays that can withstand near‑term volatility. They also recommended mid‑term holders keep positions through the holiday rather than attempt to time the tapering, banking on policy spillovers from the Two Sessions and continued re‑pricing of China’s global competitiveness in sectors such as chemicals, new energy, and electrical equipment.
For international investors, the short‑term takeaway is familiar: geopolitical and U.S. monetary policy developments can sharpen outflows and trigger tactical corrections, but China’s internal policy calendar and sectoral price dynamics remain the dominant forces for A‑share performance. The coming weeks will test whether liquidity and policy signaling can push the market back into a broader advance or merely sustain a choppy, rotating regime.