The market may be gearing up for a bullish trend!

In today's morning session, an impressive surge was noted in the shares of Contemporary Amperex Technology Co., Limited (CATL), which rose by 5%, pulling various indices upwardsRecent news reveals that Masdar, a global leader in renewable energy and sustainable urban development, has selected CATL as the preferred supplier of battery energy storage systems for its round-the-clock (RTC) project in the UAE.

At the same time, a crucial indicator in the A-share market exhibited a significant turnaroundThe number of stocks with bullish arrangements shifted from decline to rise last FridayHistorical data suggests that this indicator, which neared the 100 mark, often signifies a market bottomThe previous Thursday, this indicator had indeed dropped to that pivotal levelWhile the indices saw only modest gains on Friday, the count of stocks in bullish arrangements skyrocketed by over 20%. Such movements typically point towards promising market developments.

Welcome Positive News

In the opening moments of trading on Monday, the market showed a relentless upward battleLeading the charge was CATL, which briefly exceeded a 5% increase, catalyzing a notable rise of 2% in the ChiNext indexThis surge was buoyed by significant positive news surrounding CATL.

Recently, Masdar confirmed that CATL has been selected as the preferred battery energy storage system supplier for what is poised to be the world's largest solar and battery hybrid energy storage project, the UAE RTC.

This project boasts total investments exceeding $6 billion, comprising a battery energy storage system with a total capacity of 19GWh and a solar photovoltaic project of 5.2GW

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Upon completion, the project will be recognized as the world's first large-scale power generation initiative capable of providing continuous clean energy 24/7, powering the first AI + zero-carbon green data center globallyCATL emphasizes that energy security is crucial for data security, and as the premier supplier of energy storage solutions worldwide, it will supply a highly integrated, long-lasting, and safe Tianheng battery energy storage system for this collaboration.

Meanwhile, Chinese assets abroad seem to be experiencing a more stable uptrend than A-sharesThe Hong Kong Hang Seng Index opened up by 1.13%, settling at 19,804.64 points, while the Hang Seng Tech Index climbed 1.68%. JD.com saw a 4% bounce, Kuaishou rose nearly 3%, and major firms like Alibaba, Baidu, BYD Electronics, and Meituan increased by over 2%. Subsequently, the Hang Seng Tech Index jumped over 2%, demonstrating the robust health of Hong Kong's market.

The uptick in international markets has evidently stirred bullish sentiments within the investing community, leading to notable movements in the brokerage sectorMajor financial stocks surged, with China Aviation Industry Corporation and Huaxi Securities both hitting their daily limits, and other firms like Guosheng Financial Holdings, China Merchants Securities, COFCO Capital, and Guotai Junan also registering gains.

Market reactions following a high-level conversation between China and the United States indicated an upbeat sentiment, with traders actively purchasing call options linked to China-focused exchange-traded funds on FridaySusquehanna International Group's co-head of derivatives strategy, Chris Murphy, pointed out the popularity of call options for iShares China Large-Cap ETF, which gives holders the right to buy approximately 4 million shares at prices between $31 and $32 per share before the end of next week, alongside additional options expiring in February.

A Shift in Key Indicators

Notably, significant shifts are also occurring within the A-share market

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Last Tuesday, there was a robust surge with high trading volumes, yet the bullish configuration data showed a decline on that same dayThis led to a weaker performance across the following two trading daysOn Friday, the market posted slight gains, but closing data reflected the first significant reversal in the bullish configuration, suggesting a transition towards a healthier market state.

Moreover, net purchases by margin traders exceeded 6.898 billion yuan last week, marking an end to three consecutive weeks of net selling.

From the perspective of foreign investment, while there hasn't been a significant influx, EPFR Global's research director, Cameron Brandt, indicated a growing desire to re-enter emerging marketsHowever, the situation in the United States appears compelling in the near term, overshadowing the emerging market narrativeRecent interest has notably turned towards key emerging Asian markets, with substantial capital inflows directed toward India, China, and South Korea.

Conversely, data from the dragon list indicates that the engagement of speculative funds has decreased significantly, with the number of entries dropping by 65, and the total investment amount declining by nearly 13.6 billion yuan throughout the weekAnalysts suggest this trend might be linked to a shrinking market and the approaching holiday.

Another Change on the Horizon

Currently, another potential influence on equities relates to the bond market

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Recently observed volatility, coupled with significant inversions between funding rates and government bond yields, raises questionsFurthermore, the regulatory environment concerning exchange rate stability has intensifiedIt's notable that the latest data indicated a rebound in actual economic growth from 4.6% to 5.4% in the fourth quarter last year, surpassing market expectations of 5%, contributing to the increased bond market volatility.

Should the bond market weaken, expectations for economic improvement may bolster equity performanceThe upcoming bond market trajectory remains crucial to watchAccording to Minsheng Securities, transitions between bull and bear markets can be lengthy processes, typically marked by significant adjustments within the bond market, tied closely to marginal changes in economic fundamentals and adjustments in the policy landscapeFrom a broader timeframe perspective, the certainty of loose monetary policy seems assured, yet the emphasis remains on the relaxation of credit conditions and the pace of fundamental recovery, which currently shows that institutional allocation pressures still persist.

Thus, amidst these dynamics, will we witness the initiation of a spring offensive for equities? Zhongtai Securities suggests that the impact of policymaking has begun to be recognized and priced in by certain fundsFollowing the Spring Festival and the two sessions, the market may gain further clarity regarding the progress of real estate and local government projectsTherefore, similar to trends observed since 2021, market expectations surrounding policies will be critical in shaping the trajectory of the market from late January to early March in this transitional periodWith only a full trading week remaining before the Spring Festival, the market appears poised for several marginal shifts, including improving economic data, policy expectations, reduced US inflation, and an overall improvement in geopolitical circumstances.

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